Informational

How To Store Your Ethereum

Caroline Bowler

When you’re investing in Ethereum — or any cryptocurrency for that matter — it’s critical to get educated about the best ways to store your investment and its security. Cryptocurrency’s relatively anonymous nature has been something of a double-edged sword. Although it means that transactions and exchanges can occur with privacy, it also means that if you have a cybersecurity incident with your crypto, then you tend to have relatively little recourse. Though exchanges and marketplaces do have their own security measures in place, the onus is still on you as an investor to make your own decisions about the best way to store Ethereum.

Storage for cryptocurrency is referred to as a “wallet”, and there are three main varieties, each with its own distinct pros and cons. We’ve compiled some of the key information you need to know about them. If you’re new to crypto investing and wondering how to store Ethereum, this is an excellent introduction. You’ll discover the advantages of a hot wallet, how to store Ethereum offline and more. But even if you’re an experienced investor, it might be time to reconsider your storage strategy — this guide can help you stay up to date with best practices too.

The three main types of wallets available are hot wallets, cold wallets and paper wallets. Let’s take a closer look at each.

Hot wallets

Hot wallets are the most convenient method for day to day Ethereum storage and usage. They’re hosted online and provide you with instant access to your cryptocurrency as long as you’re connected to the internet. This might be in the form of a desktop-based program (also known as a desktop wallet) or an app. They’ll also include an exchange interface so that you can easily buy, swap or trade at the touch of a button. Of the different types of wallets available, they’re the most akin to online banking.

With this said, this convenience comes at the price of security. Because your investments are stored online, they can be vulnerable to hacks — just like any other online service. Accordingly, many people have both a hot and cold wallet. Utilising a combination of both enables you to keep the bulk of your investment safely stored, while also retaining a nominal amount in a hot wallet for day-to-day usage.

Cold wallets

A cold wallet allows you to store Ethereum offline, so it’s generally used for longer-term storage. It’s a hardware device that’s usually similar in size and shape to a USB drive — so you can plug it into your computer, transfer your Ethereum onto it and then stash it safely away.

A cold wallet is significantly more secure than a hot wallet. A prospective thief would need to have physical access to the device to even attempt hacking it (which in turn is an extremely difficult task). An offline Ethereum wallet can’t be accessed via the internet, so it’s free from the prying eyes of cybercriminals.

Although the benefits are undeniably obvious, an Ethereum cold wallet isn’t always the best option for every investor. If you’re a regular or aggressive trader, being able to take advantage of pricing fluctuations as and when they occur is likely important to you. Using an offline wallet adds an extra layer of complexity to this process. In this case, you may want to keep a discretionary amount of funds in a hot wallet, so that you have easy access to day-to-day transactions and trading.

Additionally, if you lose the cold wallet, you’ve completely lost access to the funds forever. With this in mind, many investors use an actual safe in order to keep their investments safe.

Paper wallets

Arguably the safest way to store Ethereum, a paper wallet is a type of cold wallet. Your Ethereum is stored offline, and your access to the storage device is printed on a piece of paper. This is currently the most difficult type of wallet to access, making it ideal for investors who are looking to keep their Ethereum in cold storage for an extended period.

However, if you lose your access code then you’ll also lose all your cryptocurrency. As you might expect, people who use paper wallets tend to make multiple copies of their code. However, it’s extremely important that you don’t share this information with anyone and keep your codes in secure locations.

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FAQs

I’ve got my wallet set up — but how do I store my Ethereum even more safely?

Once you’ve chosen your preferred storage method, there are still some other steps you can take to protect your investments. Undertaking a security scan of your computer is crucial in order to spot or deal with any issues such as malware, spyware or other related issues. Changing email and account passwords regularly is also crucial. In fact, you can also check for data breaches to your email via websites such as “Have I Been Pwned”, and make any relevant security updates as necessary.

You should also ensure that you keep track of any software updates for both Windows and Mac to ensure that you are not placing yourself at risk of malware attacks, bugs, or viruses that rely on exploiting older versions of software.

Enabling Two Factor Authentication will also add an additional layer of security when you’re accessing your crypto account. In addition to using your usual password, you can set up a requirement that a second code also needs to be sent to your phone and input in order to provide access. If your phone or computer has biometric authentication set up, this can also be done via fingerprint.

I know where to store Ethereum, but what about my keys?

When you utilise any form of cryptocurrency — Ethereum included — you generate two types of keys, public and private. They’re both complex strings of letters and numbers that are unique to your account. A public key is provided to others so that they can transfer funds to your account, while a private key is used only by you for spending and transferring from your account.

It’s worth backing both types on an external hard drive or USB that only you have access to. This will save you from needing to either memorise your keys, continually write them down or otherwise risk losing them or exposing them to others.

Is Ethereum more secure than Bitcoin?

It’s difficult to make blanket statements on which cryptocurrency is more “secure” than another. Factors like the size of a Blockchain attached to a given cryptocurrency can certainly make it more difficult for outsiders to hack or damage on a macro scale. At a micro-scale, though? Exchanges will provide security, but it’s still essential for individuals to ensure that they’re taking the necessary safety precautions — using protective software, regularly running security scans and ensuring information like passwords aren’t being shared. Knowing how to store Ethereum safely yourself is arguably the most important factor in ensuring your investment is protected.

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