Owning cryptocurrency is a package deal, and part of that package is accepting the responsibility of being your own bank. Assuming you didn’t make your first crypto purchase yesterday, it’s likely that improving the storage of your coins has probably crossed your mind at least once. The concept of personal monetary storage can be daunting because it poses a relatively new digital challenge, and the burden to do it correctly falls entirely on each individual. With that, the goal of this blog is to give both new and longtime holders a broader perspective of cryptocurrency storage possibilities.
For the sake of simplicity, breaking down any method of storage falls into 1 of 2 categories – hot or cold.
Hot storage implies that your crypto is connected to the internet. Hot storage can be a digital wallet on your desktop or funds sitting on an exchange waiting to be traded. The truth is, hot storage does not mean it is poorly stored, it simply means it can likely be stored in a safer manner. On an FDIC insured exchange, with a strong password, 2FA enabled and proper whitelisting, your crypto is likely safe. On the other hand, if your trading stack sits on an exchange that opened a month ago with low volume, it is like leaving a stack of cash on the counter of a backwoods bank and hoping the teller doesn’t take your money. Hot storage will likely continue to improve over the years, offering more sophisticated methods to secure your assets. Just remember that as long as the internet is involved, hackers will always have a way in.
Cold Storage implies that your crypto is not connected to the internet. This can mean that the coins were once stored in a hot wallet and became cold. It can also mean that your cold coins occasionally move to hot storage to trade and then back to cold storage. Examples of cold storage are hardware wallets, USBs, CDs, or hard drives, but can also include any digital device that does not connect to the internet. A user can even go as far as writing down the keys generated from a paper wallet, in which case the storage of their crypto comes down to one piece of paper. A free to use site that offers this paper service is listed below. The most popular cold storage devices are the Ledger and Trezor, as they support the majority of popular cryptocurrencies, are about the size of a flash drive, and are well regarded within the crypto community. Most middle of the road crypto holders looking for cold storage should consider these devices. As a drawback, these devices do require network fees to send to and from but are reasonable if users select slower send times and plan their usage ahead of time.
One of the most common questions people ask is how much money is enough to move your crypto from hot storage to cold storage. The only person that can answer this question is you. What we can say is that if the crypto you are storing is worth less than the cost of the cold storage you are considering buying, then you are probably fooling yourself. Another point of consideration is the expected value of your holdings down the road. There is no use in waiting for your portfolio to 10x to then buy proper storage. If you are someone that believes in having insurance on your health, property, and belongings, spending the $100 to purchase a cold storage device is better than hoping someone other than you is the next victim of an inevitable hack.
If you are storing a large amount of crypto or want an even safer option when it comes to storage, there are more advanced options within the cold storage realm. The team at NGRAVE has built, in our opinion, the coldest device that consumers can purchase – the NGRAVE GRAPHINE. We hosted the NGRAVE founder Ruben Merre on the podcast to detail how their products protect funds even in the event of a real-world physical catastrophe. Beyond physical devices, high-net-worth individuals should discuss their storage options with a reputable company that can assist in custody such as CASA, run by Jameson Lopp, who is a longtime crypto security expert and also appeared on the podcast. Their multisig product has become the industry standard for self custody of large portfolios.
Keep in mind, as complicated as storage can get, keeping your mouth shut, using strong passwords, creating multiple locations of storage, and using reputable platforms are free practices that everyone should employ. Let us know what your preferred method is, we are always looking for what is new and safe.
Alternative sources to store crypto:
Written by Adam Tarlowski