Are Your Cryptocurrency Holdings Safe?

cryptocurrency holdings

One of the main reasons why cryptocurrencies are yet to go mainstream is because many people feel that they are risky. Older generations have had the belief engrained that banks provide safety and that decentralized options have no failsafe if something goes wrong.

The truth is that there are some risks associated with owning crypto, but wise users who put the right processes in place should be able to relax. Crypto may be best stored offline, but it should also be safe online if you use strong security measures.

If Your Crypto is Online You Need a Strong Password

There are various ways to store cryptocurrency, and many users choose online means. This way, they are easily accessible if you want to trade or spend them. The price of crypto is based on how much is in circulation in online locations. With this being high in recent years, it suggests that a great deal of users hold them in hot storage on the internet.

The options of online storage include keeping the funds in an exchange like Coinbase or moving them to a desktop wallet like Exodus. The latter is the safer option of the two, as exchanges can be more susceptible to large-scale cyber-attacks. Whichever route you choose, a strong password is essential.

Unfortunately, research suggests that many internet users are lazy when it comes to thinking of a password. Indeed, each country in the world has a common password that is used by a vast number of people. Crypto holders could be sitting on a lot of wealth, so securing it with a complex series of letters, digits, and symbols is key. If you think you’re going to forget your password, write it down and keep it in a safe.  

What Would Happen if Your Desktop Wallet Ceased to Exist?

One major concern for crypto holders who keep their assets in a desktop wallet is the question of what would happen if the wallet provider ceased to exist. It seems like an unlikely scenario, but nevertheless, it is a possibility.

The good news is that people who open accounts with desktop wallet providers like Exodus are assigned a secret phrase that acts as a private key. This consists of 12 random words, and users need to write them down and store them securely. This phrase can be exported to another wallet if Exodus ever goes out of business.

Storing Crypto Offline Could be Best

If you want to feel safe in the knowledge that your digital holdings aren’t at risk of cyber-attacks, the best option is to use cold storage in the form of a hard wallet. This is a USB stick that can be opened with a password.

Once you’ve taken the crypto offline, you can then store it in a safe for extra protection. Still, there are some dangers involved with this method. Indeed, there are horror stories about users who have forgotten their keys and lost access to millions.

There are certainly varying degrees of safety with regards to holding bitcoin and the other tokens that were inspired by it. Hard wallets are your best bet, but you need to make sure that you don’t forget the password to them.

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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.