How do I protect my crypto wallet private keys
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How do I protect my crypto wallet private keys
How do I protect my crypto wallet private keys

How do I protect my crypto wallet private keys

Safely storing your Bitcoin is crucial. Unlike other forms of money that are controlled by banks and financial institutions, with Bitcoin and other cryptocurrencies you have many more alternatives on how to store and control your cryptocurrency securely.

When you think about it, when you own a cryptocurrency you actually only own a private key for that particular network. A private key is in effect a random set of characters that is used as information on the blockchain network to authorise transactions. So whoever has access to this information (private key) has access to your funds.

Remember your private key that you need to move your Bitcoin? Well that is literally the key to storing it. Whoever has the keys controls the Bitcoin (other cryptocurrencies are available). These keys can be either in digital format or even in physical format i.e. written down on a piece of paper, tattooed on your body or a paper wallet.

How to store them then? You can leave the key in your pocket, but that wouldn’t be great. You can put it in a safe in your home or place of work - which is a lot better. But someone can still break into your house and steal it. If you want to use your crypto regularly, you may also want to put some or all of it in a digital version on your phone in the form of a digital wallet which would mean you can access it easier. The only issue here is that if you lose your phone or it gets stolen it would mean you will also lose your key, and there is no way to get it back.

As a famous superhero once said, “With great power, comes great responsibility”, owning your own private keys gives you control instead of the exchange where you bought them. There is a huge plethora of wallets out there which promise the best security and features but not all of them are secure, and due diligence is always required.

Let us take a look at the current options available to Crypto holders

Online wallet

Online wallets are online services that enable you to access your crypto assets from any internet browser that’s connected online. When you leave your crypto assets on an exchange platform, you’re actually using the platform’s online wallet.

A big advantage of an online wallet is that they are easily accessible from any computer or device with an internet connection.

Being online is also one of their biggest disadvantages as they can become targets for hackers. Moreover, in a lot of cases, you do not have control of your private keys: they are controlled by the wallet provider.

Paper wallet

A paper wallet is an offline way for storing crypto assets. As suggested by its actual name, the process involves printing the private keys and its corresponding addresses on a paper sheet. As simple a process of print screen on your computer, and hey presto you technically have a paper wallet

This is in theory a simple way to store your cryptocurrencies keys offline. It requires you to be very proactive though as to where you store your wallet and that it is safe and away from harm

If your paper wallet gets lost or destroyed, you will permanently lose the access to your crypto assets, no back-ups here I am afraid (unless of course you made several copies of your paper wallet) Also, when you need to process a transaction with a paper wallet can be extremely tedious: you will need to manually enter your keys in a transaction tool, usually by using your computer’s internet browser which could expose the keys to a cyber attack.

So this is a safe way and may be better for people who are risk averse and are used to hiding things away

Software Wallet

A software wallet is a mechanism for managing your cryptocurrencies on either a ‘desktop wallet’ as in your PC or Mac or a smartphone wallet.

With this method you remain in control of your private keys which are not shared or controlled by a third party such as an exchange.

They are always connected to the internet though so they can be exposed to hackers potentially. With vulnerabilities of modern computers and smartphone well documented, it is never advisable to actually keep your private keys on either device and the risk is too great

Hardware wallet

A Hardware wallet is an offline storage option for your private keys. This is an actual  physical device that allows you to store the private keys in an actual offline and secure storage space, and in most cases with modern hardware wallets enables you to verify the transaction details on the device screen.  

With a hardware wallet, even if a hacker succeeds in gaining control of your computer or smartphone, they will not be able to take your private keys and access your crypto. Your private key is kept offline and mitigates the risk of being hacked.

As a result of this, hardware wallets are widely considered to offer the most secure wallet option as long as they are purchased from a reputable provider such as Ledger

Here at Lykke we take the security of our customers extremely seriously and we do not hold any of our customers private keys with our cold wallets, more information can be found here