In these early days of crypto, there is a lot happening in every moment, and while the community shows due diligence when keeping up to date with the latest tech, it can be challenging to stay ahead of the curve of an industry that seems to have new breakthroughs in tech every week. There are now over 1900 cryptocurrencies in the market, with blockchain solutions covering almost every product and service that may or may not need one. Money, contracts, medical records, cloud storage, privacy, and make-believe kittens. I.C.O.s themselves have currently raised a total of over $6.3bln in just the first quarter of 2018, and have been a ground-breaking new method used by companies to raise capital for their new blockchain enterprises. Unlike the 90’s tech stocks, this isn’t hyped up empty marketing, it’s blockchain, and it’s here to serve as the new internet, evidenced by a market capitalization of $500T, and a projected cap of $10-30T in just a few years from now. As speculative and volatile as they are, cryptos for many are the new 401K.
Private Keys are Paramount.
For many new to blockchain, it can be especially daunting on where to start when purchasing and storing their cryptocurrency, and who can blame them, acquisition and security of crypto can be difficult to navigate. What exchanges are the safest, and which provide the best options depending on location, setting up security, and backing up wallets. Why isn’t there a way to just throw it into a bank or an exchange and have it handled? Well, we would be back to centralization and the control that follows it. Any asset left in the hands of any third party like a bank or exchange is certainly the easiest method, however, the cost in trade off is security as these institutions are in control of your wealth, and the amount of theft related to crypto capital alone have exceeded $1.2bln. One of the biggest innovations to date is the creation of decentralized exchanges (DEX) because now users have the ability to trade assets between one another without compromising their private keys and thus safety.
What happens though, if the DEX doesn’t hold a particular asset, or does, but can provide the level of liquidity needed to buy or sell? You then need a traditional exchange to facilitate that trade. Once completed, keys remain centralized and, unless your planning to trade them again, are stored by the exchange outside of a user’s control.
Cold, ERC, Web or GitHub?
Now that you have the crypto assets to hold, its time to choose how they are secured and the best option for each particular asset. There are many different wallets to choose from out there but to simplify matters, they can be broken down into four storage categories.
Hardware wallets, like Ledger and Trezor, are some of the safest methods by far, as these devices never connect online and thus are impervious to exploit. The only issue is that they are limited to a certain number of coins that they will allow for storage. This list gets bigger every month but for now, these wallets hold anywhere from 10-25 options. If you have a coin these wallets don’t support, another wallet will be required.
Over 75% of all cryptocurrencies are able to be secured in one place. This is because they are built to run on Ethereum, and as such, are known as ERC tokens. This can easily be observed if you look at the depositing address of the token. If it starts with 0x, then its an ERC compatible asset. With these assets, they can be stored on Metamask or MyEtherWallet. This makes things convenient when finding a home for the barrage of current and future tokens on the market. MyEtherWallet is especially helpful because it can interface with Metamask, Ledgerwallet or Trezor Wallet. This means that users can store hundreds of potential coins with a storage option like the Ledger or Trezor wallets, BUT interface with them through the MyEtherWallet platform.
Web or Blockchain Wallets?
Finally, if there’s an asset that isn’t accepted by any of the aforementioned choices, it means a specific wallet is needed for the particular asset in question. IOTA is an example of this, as there is no third-party wallet provider that accepts IOTA. And because IOTA does not use a traditional type of blockchain technology, they use their own distributed technology and wallet. With IOTA, you must download a special software wallet from an official source. This takes attention and care as there are those that can exploit this process. This can be avoided by verifying the code for the wallet to be downloaded, known as the checksum. Web wallets are wallets that are not downloaded to a desktop but rather, are accessible online like Blockchain Wallet. These wallets simply require a correct URL address in order to avoid phishing, and bookmarking to ensure you always visit the same website when accessing your wallet. If users want an extra layer of protection, they can add Cryptonite by MetaCert as a browser extension.
With these main categories in mind, storing crypto should be a little easier to navigate when creating a safe and secure portfolio. In the future, blockchain ease of use will be more mainstream and much more user friendly, and, at the same time, more valuable. Spending time on the right education now, will be the best future investment for anyone’s crypto collection.