Importance of Crypto Wallets
It is important to take steps to secure your cryptoassets against loss or theft, because once your crypto is lost…. it’s gone forever! This short article will help you understand the importance of crypto wallets.
Examples of Loss:
1. Human Error- This can occur if you send your funds to the wrong wallet, or if you forget your password.
2. Natural Disaster- Your crypto wallet is destroyed by an Act of God.
3. Hardware Malfunction- Your computer’s hard drive goes down.
Examples of Theft:
1. Remote Theft- You fall victim to scams, an exchange hack or personal hack.
2. Physical Robbery- Your private keys or external wallet are stolen.
3. Government Seizure- Law enforcement or government demands an exchange to freeze your account.
In order to secure your cryptoassets, you want to store them in a wallet. A wallet is simply a computer program that allows crypto to be sent or received. Wallets are typically broken down into two categories- “hot storage” online, or “cold storage” offline.
Hot Storage:
Hot storage wallets exist on an internet connected desktop, laptop, phone or web browser. Hot storage wallets tend to be popular because they are easily created and can be used instantly; however, they can vulnerable to cyberattacks.
Cold Storage:
Cold storage wallets are not connected to the internet. They are safer than hot wallets since they cannot be accessed by cybercriminals, but they are subject to robbery, loss or natural disasters.
Our Take:
It is extremely important to safeguard your cryptoassets. Cold storage tends to be much more secure than hot storage; however, hot storage is much easier to use. If your total assets are <$10,000 it might be easiest to leave your assets on the most trusted exchanges. If your assets are between $10,000-$200,000, it is best to consider a hardware wallet where you can store it in a safety deposit box or a fireproof safe. Anything above $200,000, you would want to consider a trusted custodian.
Keep in mind, crypto holdings are not insured, so it is important to ensure that your assets remain your assets!
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