Several cryptocurrency exchanges have been previously attacked by hackers and over a billion dollars have been lost. So, how can an individual make sure that their cryptocurrency is held safe?
Usually few measures are taken to make your crypto assets safe within an exchange. A few of them are listed below.
- Email verification
- Permission to log in only from trusted devices
- SMS authentication
- Google authentication
- Trusted address withdrawals
As listed above, there are several ways to keep your crypto assets safe within a crypto exchange but storing your assets within an exchange is not really the best way to hold your cryptocurrency. Why?
- Lack of ownership — You don’t really own your cryptocurrency. Only the value of your cryptocurrency is displayed on your account in the exchange.
- Unregulated — Cryptocurrency exchanges are the cross between decentralization and centralization. The whole purpose behind blockchain and cryptocurrency is to promote decentralization. However, exchanges are in fact centralized, which creates a number of issues. Your assets can get frozen, can disappear and you can even be not allowed to make transfers while the exchange is under maintenance.
- Hacking risk — Exchange hacks are relatively common, and due to the lack of regulation, once the coins get lost, that’s it.
Storing your cryptocurrency in a place that is connected to the internet is called hot storage. Hence, all cryptocurrency exchanges are hot storage. To solve the problems mentioned above, the best way to store your cryptocurrency is in cold storage. You can basically create your own cold storage device by using a laptop/phone which you don’t use on a day to day basis. Electrum is a popular option. (https://electrum.org/#home)
Storing your assets on your own device can still be risky because there are still chances of you get phished or hacked. Therefore, crypto investors tend to invest in buying a secure cold storage device. The most popular cold storage devices are listed below.
In 2020, Ledger still stands on top of the market since its release of the Ledger Nano X.
- Can be connected via Bluetooth or by cable
- Supports 100 different assets
- Ledger Live supports your phone’s biometric security, making it easy to manage.
- Ledger says they have a safer chip than other hardware wallets. This is meant to be more usable as a secure hot wallet, not safely disconnected long-term storage.
- Even if your device gets locked, you can easily recover it using the recovery phrase.
- The device is read-only and you cant send any custom scripts to the device (Prevents from being hacked).
- You have control over your coins and can easily stake them.
Though cold storage has several advantages, the most common disadvantage is that it’s expensive for a regular crypto trader. If you believe that you can invest in cold storage for the long term, do not think twice, it’s definitely worth it.
p.s. This is not a sponsored post.