5 essential elements that will improve your trading
Exchanges and online wallets are a bad idea!
Only on 2019 alone, hackers carried out 11 successful attacks on cryptocurrency exchanges in which nearly $300 million was stolen. Throughout all the cryptocurrency fraudsters’ activities, more than $4 billion disappeared from the market (and that’s just in the first 6 months of 2019). According to a report on digital asset security by Cipher Trace, some of the most vulnerable forms of cryptocurrency storage are exchanges and online wallets run within mobile apps, software programs, and cryptocurrency exchanges.
If you want to make sure your cryptocurrencies aren’t vulnerable to theft, follow our tips for choosing the most secure forms of storage.
Cryptocurrency exchanges and online wallets most vulnerable to hackers
The moment you store your cryptocurrencies in the wallet of an exchange, cryptocurrency exchange or mobile app, you need to know that you are then most vulnerable to their takeover by fraudsters or hackers. Internet-connected wallets are referred to as “hot” (from hot wallet). On the one hand, they guarantee easier setup and access to cryptocurrencies, but on the other, they become more vulnerable to thieves.
The Chainalysis report shows that there have been 40 attacks on cryptocurrency exchanges in different parts of the world since 2011. The largest of 2019 involved Coinbene, where a total of $105 million in 109 different types of ERC-20 tokens disappeared:
As a result, cryptocurrency security experts are recommending that you store most of your cryptocurrencies in “cold wallets” (from cold storage), which have no direct connection to the global network. Exchanges, mobile apps and currency exchange offices should only be used to conduct transactions and possibly hold a small amount of funds for speculative purposes or to make daily payments. On the other hand, if you want to build the value of your portfolio in the long term, you should look for safer solutions.
Store cryptocurrencies offline, i.e. cold storage
A cold cryptocurrency wallet, i.e. one that does not have access to the global network, definitely increases the security of your funds, but limits the flexibility of using digital assets. The wallet.dat file containing your wallet information can be stored in, among other things:
- A computer application (on a device not connected to the Internet)
- On an external data carrier (for example, a USB stick)
- On a special device that supports cold wallets (the most popular of these in the form of a USB stick and having additional security features are the products of Ledger and TREZOR).
- An alternative is to write or print the private key on a piece of paper and hide it in a safe place
Flexibility in hot version and security in cold version, or what is non-custodial wallet
If you do not want to give up the flexibility offered by hot wallets daily and at the same time care about security which is guaranteed by cold storage, you should be interested in an alternative in the form of non-custodial wallets.
- Custodial wallet – in this case your private key is stored by the service provider (cryptocurrency exchange, internet exchange, etc.),
- Non-custodial wallet – in this case, the wallet similarly to hot wallet can access the Internet, but the private key is not stored by the service provider.
The non-custodial wallet provider is therefore not responsible for storing the bitcoins and other cryptocurrencies you hold, they only provide the software necessary to store them. The wallet is encrypted in your browser or your device (phone or computer) using a password that the service provider does not have access to and does not store.
The list of recommended and trusted non-custodial wallets is quite long. However, in our opinion, MyEtherWallet or Trust Wallet are worth using. A secure cryptocurrency wallet in the form of a mobile app has also been added to its services by a Polish-originated cryptocurrency price and capitalization tracking service, Coinpaprika.com.
Within the Coins software, users can store all digital assets in one wallet, buy more directly from within the app, track exchange rate changes, and enjoy the security features offered by the non-custodial wallet.