Just like any currency, you store your coins in a wallet. But, of course, its not just any wallet. Its a digital wallet, or rather software that makes sure you have ownership over your coins.
There are several different types of coin storage, and many different options within each type. Each type has their own pros and cons, as does each option. I will touch on the most common options:
* COLD STORAGE: Hardware Wallet; Paper Wallet.
* HOT STORAGE: Web-Based Wallet; Software Wallet.
A Hardware wallet is a physical object, usually similar to a USB Memory stick, used with software installed on your computer, to store your coins. These wallets are considered to be "Cold Storage" because they are not actively connected to the internet. This type of storage is considered to be the most secure because it is extremely difficult for someone other than the owner to steal the coins. Note that hardware wallets are limited as to the specific crypto they can store, and each wallet is different. Before purchasing one, make sure you check which cryptos it supports.
There are currently two hardware wallets available for purchase in New Zealand: Nano S Ledger and Trezor. Both of these wallets can be purchased through a variety of resellers including https://coinsure.co.nz, or through variety of sellers on TradeMe. As with any online purchase, make sure you research the reseller to ensure they are legitimate.
The advantages of a hardware wallet is that it is not connected to the internet, so unauthorised access is virtually impossible.
The disadvantages of a hardware wallet is that they are portable, and easily mislaid.
A paper wallets are useful if you want to have an offline wallet, but do not wish to purchase a hardware wallet. A Paper wallet is normally generated by first by a software wallet, and then printed with the wallet address and the private keys.
The advantage of a paper wallet are that it is not connected to the internet, so unauthorised access is impossible.
The disadvantages of a paper wallet is that it is stored on an easily damaged medium, and often require an in-depth knowledge to set it up properly. Generally they are not advisable for a novice user.
Crypto exchanges offer a web-based hot wallet in order to buy and sell cryptos. These wallets are intended for short term storage with the express purpose of trading the coins in the wallet. In practice many users store cryptos in these wallets long term as they are very convenient and many cryptos can be stored their. However, this is not recommended as web-based wallets are vulnerable to hackers.
The advantages of a hot wallet is the convenience of access and trade. With a username and password, you can log in to your exchange of choice and easily see your holdings, and your coins are immediately available for trading or moving to another wallet. Another advantage is that the security of your wallet is taken care of by someone else, and most exchanges will give you a variety of additional options for security such as two-factor authentication.
The disadvantages of a hot wallet is that it is vulnerable to hacking and as you don't own the wallet (the exchange does) you don't have control over it. This means if the exchange closes or is hacked, then your coins are vulnerable to loss. Exchange also have their own rules as to how much you can transfer into your wallet at a time (most wallets have minimums) and rules as to how you can use your wallet. For instance many exchanges will not allow you to mine directly into one of their wallets.
A software wallet is a wallet that you install onto your computer or mobile phone. You have complete control over this wallet, which means you are acting as your own bank, so the security of your wallet is entirely in your hands. Most cryptos have their own version of a software wallet where can can store one crypto or a variety of related cryptos. There are also multi-wallets such as Jaxx or Exodus which allow you to store a wide variety of cryptos. There is not yet a universal wallet that can hold any crypto.
For a full list of available wallets, check out Crypto Compare.
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