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The Safest Ways to Store Your Cryptocurrency in 2024 – Forbes Advisor INDIA
Summary
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Cryptocurrency investments are high risk and complex. The market is volatile, regulators are still working to establish a policy framework, and numerous scams and fraudulent activities have emerged in recent years. A Web3 security company, DeFifound that hackers stole about $2 billion in cryptocurrencies in 2023 and about $3.8 billion in 2022.
Not surprisingly, India has seen plenty of them too crypto scamsgiven that the market It is expected to reach $343.5 million in 2024, with a user penetration rate of 18.78%. Remember that investing in cryptocurrency requires you to get proper financial advice and only invest in what you can afford to lose.
Related: Why is the cryptocurrency market rising today?
Why is it essential to store your cryptocurrency?
A cryptocurrency is a digital asset that exists on a computer network on which a ledger of transactions runs blockchain technology. These digital tokens, like Bitcoin and Litecoin, do not exist in physical form. Crypto wallets store cryptocurrencies, which is crucial for safeguarding ownership of digital assets.
A crypto wallet is software that creates and stores public and private keys, allowing users to send, receive, store and track crypto assets. A public key contains a long string of shortened alphanumeric characters to make up the address of a wallet used to receive cryptocurrency. A private key is required to process the transaction.
Both public and private keys are used to perform successful cryptocurrency transactions. As the name suggests, a public key (like a QR code) is visible to the public and is used to receive cryptocurrencies. The sender, however, needs a private key to process the transaction. A private key is private to users and protects their digital assets from unauthorized access.
Malicious actors can try any method to access the private key and steal the cryptocurrencies stored in the wallet. Remember, if you accidentally lose or destroy your private key and seed phrases, your cryptocurrencies will be lost forever.
Cryptographic storage types
Cryptocurrency exchanges
Cryptocurrency exchanges are online platforms that help traders buy and sell digital currencies in exchange for cash, fiat currencies or crypto tokens. They allow users to create an account, add funds to exchange their INR investments to buy cryptocurrencies like Bitcoin or Litecoin, exchange crypto tokens for another, or receive the value of their returns in cash into their bank account.
There are two types of cryptocurrency exchanges. A centralized cryptocurrency exchange (CEX) functions like a bank that traders trust to conduct transactions or store their digital assets. This means giving complete control to the centralized crypto exchange, including access to the private key. This is why CEX is called a custodial wallet, since users do not have access to private keys.
On the other hand, a decentralized cryptocurrency exchange (DEX) leverages blockchain technology to add security to your trading. Such cryptocurrency exchanges eliminate third parties and, instead, buyers and sellers directly exchange crypto tokens with each other without using cash or fiat currencies. DEXs are known for providing non-custodial wallets, also known as self-custodial, as they provide users with complete control of their private keys.
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Hot wallet storage
Hot wallets are online software for sending, receiving, storing and tracking crypto assets. They work like online banking, where users can access their crypto wallet and public and private keys via internet-connected smartphones, desktops, laptops and tablets. Users must be connected online to access their crypto wallet.
Cold wallet storage
Cold wallets can be classified as offline wallets that use physical devices or hardware, such as a USB drive or smartcard, that store users’ public and private keys. It is available in various physical forms depending on the user’s needs. Some cold wallets even perform all the functions needed to complete a transaction from a single device online. Cold wallets can also include paper documentation, which works as physical actions. It can be used to store large amounts of cryptocurrency given the security, however, the downside is that funds can be permanently lost if the devices are misplaced, lost or damaged.
How to compare cryptocurrency deposit types
When it comes to storing cryptocurrencies securely, users can choose hardware wallets or personal custody wallets, however, this may be challenging for some people given their infrastructure, according to Nischal Shetty, an experienced software developer who founded a popular crypto platform in India, WazirX.
Shetty explained that crypto platforms comply with regulators and law enforcement authorities to prevent illicit transactions and ensure multi-level KYC checks, identity verification for user onboarding and fund withdrawals, overall necessary to provide a secure operating environment for all users.
Managing crypto assets via wallet has pros and cons, says Sumit Gupta, co-founder of cryptocurrency trading platform CoinDCX.
Gupta explained that while traditional cold wallets offer robust security, they require careful management of physical devices. Self-custodial wallets offer greater control but carry the risk of asset loss if the initial phrases are forgotten. Centralized exchanges offer convenience but involve entrusting funds to a third party.
It is crucial to choose a compliant crypto platform for legal protection and recourse in case of unexpected events, added Edul Patel, founder of a crypto investment platform, Mudrex.
Patel explained that users should regularly update security measures, such as two-factor authentication and encryption protocols, in all storage solutions to add protection against evolving threats to a large extent, all while balancing convenience and security , allowing investors to manage their own cryptocurrency. holdings effectively, minimizing potential vulnerabilities.
Featured partners
Inheritance
Over 1 million investors trust Mudrex for their cryptocurrency investments
Safety
Mudrex is the Indian government. Recognized platform with 100% insured deposits stored in encrypted wallets
Commissions
Enjoy zero cryptocurrency deposit fees and the best rates in the industry.
Award-winning broker
Listed in Deloitte Fast 50 Index, Best Global FX Broker of 2022 – ForexExpo Dubai October 2022 & more
Best-in-Class for investment offerings
Trade over 26,000 assets with no minimum deposit
Customer care
Dedicated 24/7 support and easy registration
We invite you to invest carefully, your capital is at risk
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Frequently Asked Questions (FAQ)
What are the different types of cryptographic storage?
Cryptocurrencies can be stored in three different ways, as follows:
- Cryptocurrency exchange: Online marketplace where traders buy and sell cryptocurrencies in exchange for cash, fiat currencies, or crypto tokens.
- Warm wallet: Online software used to send, receive, store, and monitor crypto assets using Internet-connected desktops, laptops, and tablets.
- Cool wallet: These are physical or hardware devices that store users’ public and private keys, such as USBs or smart cards. The downside of a cold wallet is that funds can be permanently lost if devices are misplaced, lost or damaged.
Can I store cryptocurrencies in a USB?
Yes: Cold wallets use physical devices, such as USBs or smart cards, to store large amounts of cryptocurrency and come with a number of security features to access the device. However, you can lose crypto assets permanently if the devices are misplaced, lost, or damaged.
What is a crypto wallet?
A crypto wallet is software that creates and stores public and private keys, allowing users to send, receive, store and track crypto assets.