How Do You Store and Protect Your Cryptocurrency?
What are crypto wallets?
Crypto wallets don't store your cryptocurrency. Instead, they store the private keys you need to access your holdings on the blockchain.
Important: If someone gets your private keys, they can take your cryptocurrency. |
How do you choose the right wallet type?
Based on who controls your keys: Custodial vs. Non-Custodial Wallets
Custodial wallets are managed by third-party services such as cryptocurrency exchanges or financial institutions. These wallets hold your private keys on your behalf, similar to how a bank holds your money.
Non-custodial wallets give you direct control over your private keys, providing full autonomy over your cryptocurrencies. These keys are often combined into a Recovery Seed phrase—a collection of 12-24 unique words that enable access to all funds in the wallet if lost or stolen.
| Type | What it means | Best for | Examples |
| Custodial | A company holds your keys | Beginners who want simplicity | Exchange wallets (Coinbase, Uphold) |
| Non-custodial | You control your keys | People who want full control | MetaMask, Trust Wallet, Exodus |
Based on internet connection: Hot vs. Cold Wallets
Hot wallets are connected to the internet, making them more convenient for frequent trading or spending but potentially more vulnerable to online attacks. Examples include mobile and desktop wallet applications.
Cold wallets store private keys offline, significantly reducing the risk of hacking. These include hardware wallets (physical devices that store keys offline) and paper wallets (physical documents containing key information). Cold wallets are recommended for storing large amounts of cryptocurrency that you don't need to access frequently.
| Type | What it means | Best for | Security level |
| Hot wallets | Connected to internet | Everyday use, smaller amounts | Medium |
| Cold wallets | Stored offline | Long-term storage, larger amounts | High |
How Do You Protect Your Cryptocurrency?
If you use a non-custodial wallet:
- Save your recovery phrase in a secure, offline location
- Never share your recovery phrase or private keys with anyone
- Use a strong password and two-factor authentication
- Back up your wallet information
If you use a custodial wallet:
- Choose reputable providers
- Enable all security features
- Use unique passwords
- Be alert for phishing attempts
The cryptocurrency landscape continues to evolve rapidly, making ongoing education and adaptability essential for anyone entering this space. |
