Hodl Your Crypto Safely: Introduction to a Non-custodial Hard Wallet

As cryptocurrencies become more and more “mainstream” – whether as a new, digitally entrenched way to get rich for traders and investors, or as building a long-term financially stable future, they are also becoming an easy catch for many crypto scammers. And it’s not only about digital thefts – but also your own simple mistakes that can cost you dearly. Thus, knowledge is the key to a safe investment and the security of your digital assets. This article written by Brendan, an expert Advisor on The Cake, will lay the groundwork for keeping your hard earned crypto safe and highlight the fundamental security best practices.

 

 

🗣️ In crypto securing your funds is non-negotiable 🔐

Security is a fundamental tenet for anyone active in crypto space. Although you can quickly improve the security of your digital assets at the beginning by for example strengthening your passwords, using two-factor authentication (2FA), avoiding potential email scams, etc., to ensure your safety in the long run takes more time, and for sure requires deeper understanding. Such advanced knowledge goes well beyond just setting strong passwords and avoiding potential cyberattacks. I mean here a holistic approach that integrates best practices for processing, storing, and managing your crypto assets, as well as the right use of available technology, understanding potential scenarios – i.e., preventing potential risk and threats.

 

Focus on storage with a Crypto Hardware Wallet

As an aside, if you are still at an early stage and know little or nothing about crypto storage options, please check this short article with a few simple but vital tips about crypto wallets and exchanges: “Security Tips for Beginners”If you’re already at least familiar with various storage alternatives, and especially if you’ve heard of the term “hardware wallet” before, keep reading. There is a lot here worth exploring.

 

 

🗃️ First let us break down wallets into two classes 🗃️

 

1. Custodial wallets

While this type of asset storage is not the focus of this article, it is still worth noting, especially to remind you of how it works and why it should not necessarily be the number one choice. For many (especially new) crypto users, a custodial wallet may seem like a simple and convenient option, but it is neither the safest nor the most preferable in the long run.

In a nutshell, a custodial wallet is any place where you store your crypto that is not controlled by you, meaning a third party holds your private keys. This means that your access to your money can be restricted according to the entity hosting the funds.

This includes all CEX (centralized crypto exchange) based wallets, and even your personal bank account, various wallet providers, as well as hot online wallets. The responsibility of keeping your funds safe is theoretically in their hands even if one the whole they have a history of being hacked, losing funds and making bad decisions.

 

2. Non-custodial wallets

The safer wallet option, usually chosen by more advanced users – security and decentralization focused community, would be to use a non-custodial walletMeaning any crypto wallet where the responsibility for managing and securing your private spend key falls directly to the user, i.e., to you. True, the vision of such responsibility may seem a bit overwhelming at first. But it sounds more dangerous than it looks in practice.

Thus, for example: if you’re already concerned about potential loss, damage to a non-custodial wallet (with its most popular form of a hardware wallet), or simply you worry about forgetting your password – calm down. Non-custodial wallets will often use a seed phrase to recover the private key in the event that a device is lost or damaged. As long as your recovery phrase (a seed phrase) is with you, it is all good. With this unique series of words, you still have full access to your crypto, even if you try to access it from another device.

After all, remember that cryptocurrencies are not a physical asset stored on any device (i.e. in the hardware wallet itself). They live on a blockchain. So, even if you lose your wallet, your assets should be fine and still available. Sure… It gets a lot more complicated when your wallet is stolen, but I won’t delve too deeply into this topic at the moment.  

 

Back to the point, advantages of choosing a non-custodial wallet

It brings you not only self-controlled safety but also additional benefits, such as:

‣ All the details associated with your digital funds rest solely with you, so the risk of data breach is lower.

‣ With a non-custodial wallet you do not need to seek the permission of another to use your money.

 

As we already explored custodial and non-custodial storage options above (with my favourite being hardware, non-custodial one), I still need to remind you of another classification type.

 

🔥 Hot and cold crypto wallets 🥶

Simply speaking, hot wallets are “online”, representing any crypto storage option that is connected to the internet. This includes your exchange based wallets, your wallet apps, and your cloud based wallets.

With a hot wallet, your private spend keys are susceptible to hackers so only use this type of storage for short term and low amounts of coin. Even if you are keeping your entire device spotless, regularly patching and using good security fundamentals you still may be exposed to a zero-day exploit.

For this reason, it is much safer to use cold wallet storage. And here we are with the previously mentioned hardware wallet. But not only. Cold Wallets are any crypto wallet that requires physical access to use. This includes purpose built crypto hardware devices, USB wallets, but also paper wallets, and even air-gapped computers.

The great advantage of this type of storage is the addition of security. All of these storage methods (cold) require you to physically interact with the devices in our third dimensional space, completely stopping any remote digital criminal. Namely: any transaction verification lies ultimately in your hands (even if started online, it can be verified only by using your physical device).

 

Summing up, an important note to remember, and a big advantage at the same time 💡 

📎 All cold wallets are by their very nature non-custodial and the superior choice for long term storage. Not only in terms of security but also freedom of choice. They give you full control over your crypto wealth. Moving your tokens and coins exactly whenever you want, without any preset delay period / third party dependencies, with high immunity to hacking. Therefore, if you value independence and security – consider storing your “crypto funds” in cold hardware wallets.

 

🕵️ Make your own decisions. And… 

Regardless of your final choice, be sure to always follow best security practices – passwords, safe web browsing, eyes open, fresh mind. And… of course DYOR. Knowledge is an asset itself. An asset that helps your wealth grow while staying safe. Keep your focus on education. If you have additional questions – check out https://thecake.chat/advisor/brendanbyrne/ and simply start a chat. I am happy to answer your doubts.

 

 

About the Author ✍️

 

Brendan Byrne, Advisor on The Cake Brendan Byrne

Consulting and training newbies about crypto related technology, fundamentals and industry standards.
Storage options and security, valuation models, hidden histories and more.

The Cake @Brendan

Other articles by this author “Privacy Coins and You” 

 

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