3 min read - [education, wallet]
Series: Introduction to wallets
Welcome to the third and final article of our intro to wallets series. In this section we will cover some of the important features and qualities to consider while choosing your next cryptocurrency wallet.
This series is an accompany resource to our wallet guide
Crypto currency isn't stored behind the advanced security and redundancy systems of banks, but rather stored and secured by each the entire network, which each person being responsible for their own keys. This is great, but it changes how an individuals security should be treated. The only information needed to access and spend funds are the private keys, and once someone gains access to your private keys there's practically nothing you can do to get your funds back.
It sounds scary 👻, but with a few tips it's simple to keep your assets safe.
Your private key can be represented as a 12 or 24 word long series of words, known as your seed words. Whenever you create a new wallet, make sure you back these words up in a secure place, offline. Most wallets will remind you to do this. Mnemonic
The recommended way is to write them down with a physical pen and paper, then secure that piece of paper as if it's extremely valuable. Because now it is.
A more advanced option is to engrave the words into steel or some other fire-resistant material.
Only store enough crypto on your phone for everyday spending. In the same way you wouldn't walk around with your entire bank balance, it's not a great idea to walk around with your entire crypto portfolio on you. I recommend carrying $100-1,000 USD in crypto in your wallet so it's always ready to spend when restaurants and stores accept them.
The rest should be stored in a separate secure - preferably offline - wallet.
Online wallets and exchanges sometimes get hacked. It's unfortunate and rare, but it happens. If your money happens to be stored in a wallet of a hacked exchange, then it can also be stolen. Be wary of any service which requires holding large amounts of crypto on their wallet. Store your funds in a wallet which you and you alone control, and only store funds on exchanges while trading with them.
When you do need to store your money with an exchange wallet - such as when trading, buying, and selling crypto - it's very important to use 2 Factor Authentication (2FA). Passwords are okay if they are complex, but they are often weak and the target of hacks. 2 Factor authentication adds another layer of security between an attacker and your funds.
It's easy to create a wallet and tell yourself you'll "Back it up later", only to forget about that step completely.
It's a good idea to regularly verify which wallets are backed up, and how they are backed up. I recommend doing this self-audit of wallet backups 1-2 times each year.
Don't tell people what cryptos, and how much you're holding; especially on the 🌈internet🌈. Letting people know how much you have makes you a target for hacks and theft. If someone manages to take your funds, there's very little you can do to get it back, so taking privacy seriously is important.
If someone gives you a wallet, DO NOT USE IT.
Always create your own wallets. Once a wallet is created and the private keys are known, they can always be used to access the wallets funds. A common scam is for someone to "setup" a wallet for you, then after you use the wallet and deposit funds they steal everything in it.
Every wallet makes it trivially easy to create new wallets, so never accept a wallet from someone else.
If you die and only you know how your wallets are backed up, then the assets are lost forever. Depending on your situation, it is a good idea to let a loved/trusted one know how they can recover your funds in the event of disaster.
That's all for the introduction series for now.
Hope you learned all about the various types of wallet, features to look for, and steps required to keep it all safe.
For help choosing your wallet, check out our Wallet Guide