Until recently, if you wanted to own cryptocurrencies like Bitcoin, ethereum or Ripple (XRP), the safest and easiest thing was to buy them from a website called an exchange. These were websites where you could buy and sell your crypto for other currencies like dollars, euros or yen.
But in the past year or so, something strange has happened. Cryptocurrencies are becoming more and more popular, but most of the exchanges that let you buy them with your credit card don’t seem to be trustworthy. It’s possible that some of them were hacked; some people believe that was what happened to Mt Gox. But it’s also possible that the exchanges started out as scams and are now being run by crooks. If you want to keep your crypto safe because you don’t trust these sites, what should you do?
In this article we explain six different ways to store your currency safely: using an online wallet or a hardware wallet, keeping your coins offline in a safe place, using a paper wallet – not just any old piece of paper but a special type of paper – using a brain wallet – and storing your coins on an offline computer hard disk.
We cover each method in detail, show images to help you understand how they work and provide links to related
If you want to make money from your cryptocurrency, that’s great. If you want to make an impression on your friends and family, that’s also great. But for most people the most important thing is to be able to keep their cryptographic assets safe and secure. Here are six simple steps to ensure that your crypto is always protected.
1) Use cold storage
The difference between storing your cryptocurrency in an online wallet and safely storing it on a hardware wallet is actually quite subtle. In both cases, you’re trusting someone else to secure it for you. But in the case of an online wallet, you’re trusting them with a bunch of money they don’t have. Or they don’t have, and they don’t know where it is. In the case of a hardware wallet, you’re trusting someone else to keep something valuable (your money) secure. If you put the money in their pocket, it’s likely to get stolen by one of the people who are connected to that pocket via a Matrix-like network of shifting alliances and corporate ties.
There are two ways to protect yourself against this risk: You can either move the money into a separate wallet that isn’t connected to the shared network, or you can use a hardware wallet (or “cold storage”) instead of an online wallet.
The only way to keep your cryptocurrency safe is to keep it secure. The first thing to do is to make sure that the computer you use to store and use your cryptocurrency is secure. Use a hardware wallet (a small device like a USB stick) or a paper wallet (if you can’t find one, make one).
The second step is to make sure the software you are using is secure. This can be a difficult thing. If you are using an exchange, beware of phishing scams! In particular, if you are using an exchange that holds customer funds on behalf of customers, be sure to read security disclosures from the exchange.
Thirdly, make sure that you don’t take any unnecessary risks. It’s tempting sometimes to deal in large amounts of cryptocurrency that have been hacked previously, but it makes sense not do so unless you have a special excuse (such as buying or selling something very expensive).
The first generation of cryptocurrencies, such as Bitcoin, were created to be “peer-to-peer,” which means that they did not have a central bank or master server controlling them. This meant that the currency had no central point of failure, which is one of the main things that makes it safe. However, this still leaves you with the problem of how to store your cryptocurrency since there is no central location for you to store it in.
The best way to prevent loss of your cryptocurrency is to use a hardware wallet, which stores your private key on a small piece of hardware that you must keep in your possession and only use with your computer. Then there are online wallets, which are faster and more convenient but also more vulnerable than hardware wallets.
Finally there are paper wallets, which I believe do not provide any added security over hardware wallets but do offer an easy way to spend your digital currency whenever you want to instead of having to go through the trouble of transferring it from online wallet to hardware wallet then back again each time you want to spend some or all of it.
Even if a cryptographer can assure you that your private key is safe, that’s not enough. If it’s really valuable, you should keep it somewhere else, too.
It’s not enough to just put the cryptographic key onto a hard drive or thumb drive or USB stick or hard disk. You want to make sure your computer doesn’t get hit by lightning, that there aren’t any criminals looking for it, and that no one gets into your house and steals it.
If you’re paranoid about keeping your keys on a computer, there are other options. One of them is to use an offline storage device connected by a cable to the computer. To do this, install an application like VeraCrypt on your computer, then encrypt all the data on the hard drive with a password of your choice.
Offline storage devices can also be used to store keys which are not encrypted with passwords. If you change your password often, you’ll need to remember it for each version of your data; but if you have multiple backups of the data, you can keep only one copy with an encrypted key and write down the others with their passwords. (Then use another backup program to do the encryption.)
People often think of cryptography as the science of secrecy. But it is really a branch of mathematics that deals with the question of how to keep information secret. Cryptography is about keeping secrets safe.
How does the government get its information? By reading your mail or tapping your phone or listening to your phone calls. How do you keep your information safe from those kinds of snoopers? By encryption. It’s a kind of math: if you encrypt something, and someone wants to read it, they can’t because they don’t know what the encrypted message says.
And it’s not just secrets that need protection: we have bank accounts, credit card numbers, e-mail addresses and so on. We want these things to be secure as well, or else criminals will use them to steal our money or send spam to us. When you hear about “cybercrime” this is what people are talking about: it’s not so much that hackers break into computer systems; it’s that they steal information in cyberspace.
But crypto doesn’t just secure data; it also secures techniques for keeping data safe—and in particular “coinage.” Crypto lets you keep track of who owns what money; let’s say you own 100 coins. Crypto keeps everyone