Three Ultra-Safe Ways to Store Your Cryptocurrency
Buying cryptocurrency has never been easier. Today, you can make an account on an exchange (like ours) in minutes. Then, in just a few clicks, you can turn your fiat cash into Bitcoin, Ethereum, or another inflation-proof digital asset.
But what are the next steps? These days, the possibilities are endless. You could start earning interest using DeFi, go to purchase an NFT on a popular marketplace, or even find your way into the metaverse through exciting play-to-earn games and new, rapidly growing, digital worlds.
Or, you may just be interested in saving your crypto. Instead of losing 5–10% every year to inflation by keeping your money in cash, you would prefer to keep your ‘digital gold’ in a safe place, until you need it.
Finding the safest possible way to store your cryptocurrency is not a matter to take lightly. Cybercrime is evolving every day, and you must put your crypto in a place that cannot be affected by technical failure, natural disaster, or human error.
This post aims to describe just a few verifiably secure solutions you can use to make sure your digital assets stay safe for many years to come.
Long-Term Crypto Storage | Three Options
Option 1: Hardware Wallet
When malicious attacks occur in the cryptocurrency industry, it’s usually against a cryptocurrency exchange. Unfortunately, large hacks are not infrequent, with two large security breaches occurring in the last month alone. Over the last 10 years, more than 12 billion in value has been stolen in a total of 226 incidents.
The way most experienced cryptocurrency owners protect themselves from exchange-related vulnerabilities is by withdrawing their funds to their own, external wallets. For larger portfolios, hardware wallets are the most popular solution.
A hardware wallet is a secure device that has been specifically designed to store private keys. A private key is a kind of cryptographic code that must be entered in order to authorize blockchain transactions.
The primary value-add of hardware wallets is their ability to give full isolation to these keys. A kind of “cold storage,” these devices are never connected to the internet and only interface with other devices when plugged in or connected by their owners via USB or Bluetooth to their own computers or mobile phones.
Carrying out transactions using a hardware wallet is actually quite simple. Popular wallets like Ledger and Trezor sync directly with software platforms that the user installs on their computer or mobile phone. Within these platforms, users can track their crypto holdings and authorize payments. All withdrawals operate on the principle of 2-factor authentication, requiring the user’s confirmation through the hardware wallet’s interface.
Hardware wallets are very reliable devices. That said, they may not be appropriate for all cryptocurrency use cases. Given their price tag (about 150–250 EUR), they are not always accessible to new cryptocurrency users. Moreover, out of the risk of device loss, theft, or damage, they still require seed phrases to be written down on pieces of paper. Storing these recovery phrases may be a hassle for some.
Option 2: Multisignature Wallet
Long-term cryptocurrency storage is as much a story of custody strategy as it is of advanced cryptographic technologies and hardware devices. In the long term, externalities, such as accidents or natural disasters, could arise that might affect the accessibility of private keys. In extreme situations, wallet owners may be incapacitated or, unfortunately, pass away, in which case their beneficiaries need a way to access funds.
Multi-signature (“multisig”) wallet protocols ensure that fund accessibility does not depend on a single backup or on any particular individual’s ability to enter a private key. Put simply, multisig wallets are facilities for private key storage that requires multiple authorizations from a fixed number of individuals or custodians.
For cryptocurrency owners, this kind of wallet allows for added flexibility while ensuring a high degree of security, and many options are available on the market today. Two of the most popular multisig wallets are provided by the hardware wallet manufacturers Trezor and Ledger. Software-based solutions are also available, such as the one developed by DeFi service company Gnosis.
No matter the wallet you choose, when you set up your multisig crypto custody strategy, you will have to decide, first, how many people will hold keys, and second, how many signatures will be required in order to approve a transfer from your wallet. Most private individuals choose to follow the “3:2 principle.” This means that their wallets are set up to have three private keys. Two signatures are required to carry out a transaction.
The only real disadvantage to multisig wallets relates to custodianship expenses. Multiple safety deposit boxes may cost several hundred euros annually. Additional setup costs, such as the preparation of legal documentation and the purchase of hardware wallets (with backups), may in some cases add up to more than a thousand euros per year.
Option 3: Cryptocurrency Insurance
Like it or not, cybercrime is always evolving. This is especially true as it concerns the three-trillion-dollar cryptocurrency industry which, unfortunately, is a constant target.
Hackers are always on the lookout for vulnerabilities in individuals’ and organizations’ crypto custody strategies. Going into the future, exchanges will continue to get attacked, and regular cryptocurrency users will forever fall victim to criminals.
Regardless of how you intend to store your cryptocurrency, it is worthwhile to seek a second line of defense. Today, insurance policies that protect against cryptocurrency theft serve this purpose quite nicely.
Over the last few years, a number of well-respected insurers have entered the crypto-insurance arena. The market leader, Coincover, is an established insurer that provides coverage for cryptocurrency wallets and infrastructure against most cyber threats. Their policies are underwritten by Lloyd’s of London, a highly-trusted company that has been operating for more than three centuries.
If you are interested in insuring your cryptocurrency using Coincover, make sure to contact our team of digital asset specialists. We offer the simplest insurance and custody solution on the market today and would be happy to walk you through every step of this process.
Why Choose Altercap’s Cryptocurrency Insurance Product?
Rapid setup: Account verification takes less than five minutes
Instant acceptance: Once your account has been verified, your policy will be ready in just a few clicks.
Flat rates: Easy-to-understand fee structure with per-month rates starting at just $1.
Simplified asset management: Blanket coverage for all coins and tokens held on our platform.
First three months free: This is a limited-time offer for new Altercap users.
At the end of the day, how you decide to store your cryptocurrency is up to you. Indeed, the ability to control one’s assets is the whole point of blockchain technology and the basic premise for digital stores of value like Bitcoin. Whatever you decide, do make sure to put redundancies in place and to tell people you can trust, including family members, how you have set things up. This, we believe, can make all the difference in creating real multi-generational crypto wealth.