How do crypto exchanges work
This is how you store your cryptocurrencies properly
Anyone who buys Bitcoin, Ripple or another crypto currency must inevitably deal with its storage. Which digital wallet you choose depends not least on your personal needs. Should faster money movements be possible? Or is the main focus on a long-term investment?
One thing is certain: Choosing the right wallet is crucial to ensure that the crypto money doesn't end up in the wrong hands. If you park your digital currencies on an exchange, for example, you can no longer make any mistakes yourself. But the money can still disappear quickly. Because these services have repeatedly been a target of hacker attacks in the past.
The right wallet is by no means just a tool to prevent hacker attacks. One should also protect oneself from one's own human error. There are numerous cases in which people have lost, accidentally thrown or accidentally badly damaged their hardware wallet, including the bitcoins backed up on it. That can quickly cost those affected a fortune. For example, a man from Great Britain accidentally disposed of his hard drive in 2013 and thus also lost his 7,500 Bitcoins, which would have been worth the equivalent of more than 100 million euros at the end of 2017 ..
What is a wallet?
A wallet is software for storing cryptocurrencies that also allows crypto money to be received and sent. However, the digital currencies are not directly in the wallet. Rather, the digital wallet is the repository for the public and private keys that are used to gain access to the coins and which are actually stored decentrally in the blockchain. The public key is comparable to the IBAN of an EC card. Digital money can be sent there. The private key corresponds to the secret number for the EC card and is used so that you can send crypto money yourself.
Wallets can be roughly divided according to whether they are stored “hot” or “cold”. Hot storage is the storage of coins on a computer that is connected to the Internet. Cold storage therefore requires that the wallet is not connected to the Internet. If you need regular access to your digital currencies because you use them to do your everyday purchases, hot storage is a good choice. Money movements can then be processed very quickly. If you want to invest in the long term and only rarely make transactions, the safer option is recommended: cold storage.
Probably the easiest to use, and therefore preferred by beginners, are hot-stored wallets. They are well suited for fast transactions and do not require any additional devices such as extra hardware. A distinction is made here between an online wallet and a mobile or desktop wallet.
An online wallet can be accessed via a cloud. The wallet is therefore not stored on a special device and can therefore be opened over the Internet regardless of location. This makes the online wallet the most practical, but also the most risky way of storing digital money. The reason for this is that the private and public keys must be secured on an external server in order to offer this level of convenience.
Cryptocurrencies can be stored more securely on a mobile or desktop wallet. All you need to do is download a wallet to the device of your choice and it can serve as a storage location for crypto money. Access to the wallet from another device via a cloud is not possible here. Although this option allows less flexibility, you do not have to entrust the access keys to your finances to an external server.
Everyone who invests in crypto money is advised to keep their currencies cold. This can be done using external hardware, a piece of paper or a good number memory. Cold storage is strongly recommended, especially for long-term investments.
The purchase of a good hardware wallet costs up to 100 euros. However, the investment is worthwhile if you want to park larger sums of money inviolable for hackers. The most popular hardware wallets are the Ledger Nano S and Trezor. Both are considered very secure and can be connected to a mobile phone or computer via a microUSB cable. The Trezor hardware is sometimes described as complicated by beginners. However, if you deal with it in detail, the operation is easy to understand.
Buying a used hardware wallet can be dangerous. Because it could already have been manipulated by hackers with malware. We recommend: only buy directly from the manufacturer.
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