This is excerpt of article written by Alex Moskov
So, you’ve got this digital currency. You can’t really chuck it in your pocket. Let’s go through some useful definitions before we jump into storing cryptos:
- Exchange platform: where you trade money for cryptocurrencies such as Bitcoin, Ethereum or Litecoin .You can also trade one cryptocurrency for another.
- Wallet platform: essentially a bank account where your cryptocurrencies are kept.
- Hard wallet: an “offline” wallet that is not linked to a network. Desktop and mobile wallets are referred to as software wallets and are less secure than hardware and paper wallets because they are online.
- Public Cryptographic Key: your account number. Similar to how someone would send money to your bank account via your account number, your public cryptographic key is the information you give to someone to receive cryptos.
- Private Cryptographic Key: the key that allows you to spend your Bitcoins and other cryptocurrencies. You guard this with your life. If someone has access to it, they can transfer (steal!) your bitcoins.
Now that we’ve got that out of the way, we can discuss Bitcoin wallet better.
When you hear of bitcoins being hacked, you’re probably hearing about an “exchange platform” being hacked. Since Bitcoin’s blockchain structure makes it EXTREMELY difficult to hack (borderline impossible), it is considered very secure.
Exchanges, however, are a .different story Perhaps the most notable Bitcoin exchange hack was the Tokyo-based MtGox hack in 2014, where 850,000 bitcoins with a value of over $350 million suddenly disappeared from the platform. This doesn’t mean that Bitcoin itself was hacked; it just means that the exchange platform was hacked. Imagine a bank in Iowa is robbed: the USD didn’t get robbed, the bank did.
Industries surrounding Bitcoin are new and not without issues. Bitcoin advocate and venture capitalist Marc Andreessen stated, “MtGox had to die for Bitcoin to thrive. Its former role from early Bitcoin days has been supplanted by better, stronger entities.”
Even though most wallet platforms are considered extremely secure, the prospect of hackers makes many users paranoid.
That brings us to the use hard wallets. A hard wallet is essentially a USB that allows users to store their cryptographic keys offline and off of exchanges. Your cryptographic key only lives on your hard wallet and is impossible to hack (unless someone physically steals your hard wallet).
Hard wallets are so secure that there are countless stories of people carelessly misplacing a hard wallet full of cryptos and never being able to recover thousands, hundreds of thousands, or millions of bitcoins. The two most common hardware wallets are the Ledger and Trezor hardware wallets.
Some users opt to use a “paper wallet,” which is essentially your cryptographic keys on a piece of paper stored somewhere safe like a bank vault. Although paper wallets are not recommended, they can be done either by an online key generator (not recommended due to threats of malware) or handwritten.
Whatever wallet you choose remember this is a decentralized platform you are totally responsible for the safeguard and security of your cryptocurrencies.
This Article originally posted on Coincentral.com