Everyone talks about the latest “Bitcoin hack”. But the reality is, Bitcoin has never been hacked — people were hacked. Their computers, their mobile phones, exchanges were compromised. Hell, even a stolen piece of paper can mean losing it all.
After buying my first cryptocurrency (in my case, Ethereum), I went on to make my first trade and bought some Dash and Litecoin with my 90% profit margin.
And then my laptop died.
I was using Exodus then, and retrieving my cryptocurrency portfolio was as easy as entering 12 words (my passphrase) on a new computer.
In this article, you’ll learn a number of different ways that cryptocurrency users, traders, or HODLers can store crypto in ways that are as futureproof as they are hackerproof (or laptop-deathproof). Cryptocurrency so Deathproof even Kurt Russel can’t kill it.
Lost Didn’t Lose All My Cryptocurrency When My Laptop Died
Exodus is a great cryptocurrency wallet solution. It’s a software wallet that is both beautiful to work with as it is secure. Mind you, it may not be the most secure crypto wallet on the market, but it sure comes close — for my needs.
I get my latest operating system security patches. I don’t run bootleg software. I take precautions (almost of the “Beautiful Mind” level, a la Russell Crowe) with my internet browsing and security. (I don’t do Pornhub on any device I store my crypto on). I trust my computer for the most part, and I trust Exodus.
Well, that’s what I did (and still do!). Then my computer died due to hardware causes without warning. Yet without access to my computer for a few weeks, I was still able to trust Exodus. I continued to buy crypto coins, send them to a wallet on a dead laptop, and diversify my portfolio because of how Exodus and all other quality cryptocurrency wallets work.
With a new laptop in hand, all I needed to do was download the app, enter my passphrase, and thar she be (yes, I speak a little pirate).
What is a Crypto Passphrase?
What’s a passphrase? I’m glad you asked. It’s a 12-word password that’s randomly generated that you store offline (on paper, and not kept in your physical leather wallet).
If you and your crypto wallet ever part ways, those 12 words are basically the embodiment of all your cryptocurrency. 12 words. A lifetime of pain if you lose them, let me tell ya. And I sleep like a baby, even laptopless. Because I know they protect me.
When you’re dealing with a technology that is independent of a centralized banking system, it’s on you to keep your passphrase safe. And before I get into ways to secure your cryptocurrency, that’s my first lesson, folks. If your crypto wallet doesn’t use a passphrase that you can store offline, I personally advise against keeping your funds there. More on that in a moment.
What is a Multi-Sig Wallet?
As I mentioned in a similar article on my blog, “a multi-sig wallet, also known as a ‘multisignature’ wallet, refers to cryptocurrency wallets that require input from multiple parties in order to complete a transaction.”
Basically, two keys (or more) are required to move funds through said cryptocurrency wallet. Not all wallets have this feature. If you’re sharing a crypto account with your spouse or a business partner, a multi-sig wallet is a must.
Improve Your Cryptocurrency Security: Tips On Using Different Wallet Types
Now that we’ve got passphrases and multi-sig out of the way, let’s look at the 5 types of wallets for storing cryptocurrency, and how you can use them securely.
John McAfee describes how easy it is for malicious websites to root your phone and steal your Bitcoin.
1. Online Wallet
An online wallet is like the Hotmail of Bitcoin — it’s not a very industry-grade solution, to say the least. It’s good for a time, but not long term. I only use an online wallet, on say, an exchange, before I move my funds. As in, I will only use an online wallet for minutes or hours.
Why? They likely won’t allow you to keep your passphrase off their server. Both your cryptocurrency and your security measures are in one place. Hackers call that a honey pot.
Whether you have a ridealong browser malware watching you engage with your online wallet or the online wallet provider itself gets hacked, it’s an incredibly volatile way to store your crypto. Don’t do it for long. See: Mt Gox.
2. Mobile Wallet
John McAfee will scold you for using this type of wallet, too (see video above). But they aren’t all bad if you use your phone responsibly.
A mobile wallet is another temporary wallet that you can use to transfer smaller amounts of crypto on a day-to-day basis. Make a purchase, send money to a friend — it’s a great intermediary for its convenience, but convenience comes with a security cost.
Here where I currently live, the Philippines, I use Coins.ph to collect Bitcoin from my clients and then immediately cash it out at a bank machine (if I do that, I don’t always HODL) or re-transfer to more secure wallets.
Worthy of note; I bought a new Oppo phone (a Chinese brand popular in Asia), may or may not have looked at risque internet websites, and later got Jaxx which is a leading crypto wallet for mobile. When I opened my account and viewed my passphrase, I heard a photo snap sound (screenshot). I can only assume my phone is rooted. I don’t use mobile wallets. You never know. Uninstalled.
Coins.ph is a mobile wallet and online wallet hybrid — as in, no passphrase, less secure. No screenshot sound. I use it for minutes. I never keep funds on it.
3. Desktop Wallet
Now we’re in Exodus land! A desktop wallet is a secure wallet you keep on your laptop or desktop PC. They usually allow you to store encryption keys (passphrases) offline, so if you lose your laptop, you don’t lose your crypto.
If you play silly internet games, download non-app store approved apps, or look at porn, don’t use a desktop wallet. Always have one device that you keep virtually “factory OEM” — meaning that you don’t put anything on it that could compromise your security.
4. Hardware Wallet
A hardware wallet is probably your best solution. It’s a purpose-built USB key that requires a passphrase and works offline. Its software is ROM-based, so it can’t be easily rewritten by a hacker. However, if you use it on a compromised machine, it’s bad news for all the reasons I’ve already stated above.
A hardware wallet is ideal for storing your mother lode, such as the bulk of your Bitcoin. You pull it out on a weekly or monthly basis, not daily.
For longevity, I suggest one that doesn’t require batteries although there are some really cool ones on the market. I suggest Ledger’s Nano S.
5. Paper Wallet
Way back in the day before hardware wallets or any other crypto wallet, for the most part, paper wallets were the defacto standard for crypto “cold storage”. This means you print it and forget it. Bury it in your backyard. Stash it in a security safe. You get the idea. It’s a long-term crypto storage solution.
A paper wallet is basically just your key and passphrase printed on a piece of paper with or without a QR. Since it’s entirely offline, it’s your safest, most secure cryptocurrency storage solution. Downside: it’s cumbersome.
BitAddress.org and Bitcoin Armory can help you create and print your own paper wallet. Just do so on a porn-free, secure, non-malware machine!
Nefarious websites can potentially compromise your online security and root your device. I thank John McAfee for that tip-off; although I won’t always trust a person who promotes a cryptocurrency too much (more on that in another article), he’s got a very substantial point.
Buy a second laptop, avoid shady Russian antivirus, put your browser settings on paranoid-level-highs.
Anything to add? Would love to hear from you in the comments.