Cryptocurrency storage

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03.06.2021 13:52
Cryptocurrency storage

    Cryptocurrency is not in the form of notes or coins. Bitcoins, Ethers and XRPs cannot be locked away in a safe deposit box or bank vault.

     

    Cryptocurrency storage has similarities to the digital form of fiat money. But digital virtual currency does not have a single accounting centre for user accounts, unlike the digital form of fiat currency. The current account status and transaction data are recorded in a blockchain, or distributed ledger. The blockchain itself resides on a network of computers. To conduct cryptocurrency transactions, the user requires a blockchain connection interface and a private key to validate the transaction.

     

    Cryptocurrency storage comes down to ensuring that the private and public keys of the cryptocurrency asset are stored. The task of storing keys and accessing the blockchain is handled by cryptocurrency wallets.

     

    Virtual currency wallets are divided into 'hot' and 'cold' wallets.

     

    'Hot' storage refers to the placement of cryptocurrency assets in online wallets, cryptocurrency exchange accounts and applications with permanent network access.

     

    'Cold' storage differs from 'hot' storage in that the private key and user data are stored offline. The connection to the network is only for a payment transaction, to confirm the transaction manually. 'Hot' and 'cold' cryptocurrency storage methods have their advantages and disadvantages.

     

    HOT CRYPTOCURRENCY WALLETS

     

    'Hot' cryptocurrency wallets include:

    • online cryptocurrency wallets
    • wallets of cryptocurrency exchanges
    • desktop and mobile crypto wallets

     

    Online crypto wallets

     

    The service of storing cryptocurrency in an online wallet is provided by a resource owned by a third party. The owners of the resource undertake to securely store the private keys on their server. The owner of the cryptocurrency asset uses an Internet connection to manage the remote application, with keys and personal data. Technical issues of transactions are handled by the resource that maintains the wallet.

     

    Examples of online cryptocurrency wallets

     

    Broex is an online crypto wallet of the Broex trading platform.

     

    It supports storage of several digital currencies, with the possibility of trading. In addition to the amount of cryptocurrency in the wallet, the user sees the current balance of each stored digital currency. With the data of the current rate and the balance of their account, the owner can quickly decide on further action with the digital currency.

     

    The wallet is tied to the user's account and protected by two-factor authentication. Broex Wallet is a full-fledged cryptocurrency investment portfolio. Suitable for the novice investor to store crypto assets.

     

    It is synchronized with a mobile app.

     

    MyEtherWallet (MEW) - available on the official website.MEW stores only Etherium and all tokens running on the Ethereum blockchain.

     

    It is essentially just an interface for obtaining a private key. MyEtherWallet does not store user data at all, it remains on the device from which one connects to the resource, and it is the user's responsibility to keep it safe. Compared to the BROEX wallet, MyEtherWallet is not as secure. An additional advantage of Broex is that it supports a wide range of cryptocurrencies and can restore access for those who forgot their password or lost their phone.

     

    CRYPTOCURRENCY EXCHANGE WALLETS

     

    Cryptocurrency exchange wallets are called custodial wallets. After registration on a cryptocurrency exchange, the user receives a wallet for storing keys with access to the trading platform. Security of storage and access to the asset is provided by the operator of the service, the cryptocurrency exchange.  The owner of the wallet uses an account on the exchange to manage funds and trade.

     

    DESKTOP WALLETS AND MOBILE APPS 

     

    Desktop wallets require special software to be installed on a personal computer. Depending on the amount of downloaded software, desktop wallets are divided into 'thick' and 'thin'.

     

    When a 'thick' wallet is downloaded onto a personal computer, the full blockchain version of the selected cryptocurrency is installed.

     

    'Thin' wallets do not contain the cryptocurrency blockchain; in the process, the 'thin' wallet accesses the blockchain for reconciliation.  The owner of a desktop wallet has full control over their funds and secures the cryptocurrency asset themselves.

     

    A mobile wallet differs from a desktop wallet in that the platform for hosting the wallet software is a smartphone.

     

    Desktop and mobile wallet variations

     

    Jaxx is a desktop app supports around 70 cryptocurrencies and provides internal conversion via ShapeShift. 

     

    PC and mobile apps use local storage of security keys. An online version is available.

     

    Exodus is a simple and user-friendly app with support for several dozen cryptocurrencies.  

    It has internal currency conversion using ShapeShift. Users can set access passwords and back up the wallet.  One of the secure and proven services on the market.

     

    Bither is an application for Bitcoin or Etherium transactions. It does not require the client to create an account and does not store personal data. 

     

    It is essentially just an interface for transferring cryptocurrencies between two users. There is an advantage of having cold storage and backup service.  Available for Android and iOS. 

     

    'COLD' CRYPTOCURRENCY WALLETS

     

    There are two types of wallets available for cold storage of cryptocurrency:

    • hardware
    • paper

     

    HARDWARE WALLETS

     

    A hardware wallet is a device for storing public and private keys of cryptocurrency assets. Externally, a hardware wallet resembles a USB flash drive. To use a hardware wallet, you connect it to your computer, enter a pin code and transfer the required amount of cryptocurrency.

     

    Examples of hardware wallets

     

    Ledger Nano S - similar in size to the usual flashcard. 

     

    It works via USB. The transaction can only be confirmed by connecting the device to a PC.  Ledger has a secure environment, inaccessible to hackers and viruses.

     

    Trezor Wallet Model T hardware wallet designed by Trezor. 

     

    It is slightly larger than a standard flashcard and holds up to 1,000 different cryptocurrencies. The device is equipped with a display, and all key operations, private and public, are allowed after user authentication with a PIN code.

     

    PAPER WALLET

     

    The simplest and most archaic way to store crypto-assets private keys. The user writes a key on a piece of paper or generates a QR code of the key with a special app. To carry out a transaction, all that is required is to scan the confirmation code.

     

    Addresses where you can get a paper wallet for cryptocurrency:

     

    bitcoin.com/paper-wallet - paper wallet for cold storage of bitcoin.

    liteaddress.org - paper wallet for Litecoin.

     

    CONCLUSION

     

    The cryptocurrency market offers users various options for storing assets. When choosing the right one for your needs, you should determine what is more important - the speed and convenience of using a mobile wallet or the security of storing cryptocurrency using a cryptocurrency exchange.

    It is more correct to combine several storage options. Use a hardware wallet for large sums and accumulation, a mobile app for current payments, and a custodial wallet for exchange transactions.  Whether using a hardware wallet or an online app, the user should be guided first and foremost by common sense and basic digital security measures.

     

    Offline storage methods have the risk of losing or breaking the device, while some On-line methods do not guarantee 100% security. 

     

    The golden mean, in this case, is cryptocurrency storage on the BROEX investment platform. 100% reliability, like a hardware medium and fast exchange transactions in a few minutes.

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