How do you secure your cryptocurrencies? A crypto wallet in a Safebox24 safe deposit box.

Cryptocurrencies have become a popular and highly accessible asset class. Virtually anyone can invest in them, and stories of millionaires who have made their fortunes with cryptocurrencies fuel the excitement surrounding new cryptocurrency projects, NFTs, and the metaverse. Despite the extreme volatility and unpredictability of this relatively new market, the number of crypto investors is increasing year after year, and trading volumes on cryptocurrency exchanges are breaking new records, surpassing those of regulated markets.

We won't be writing about whether investing in cryptocurrencies is worthwhile—we'll leave that decision up to you. However, if you have decided to invest in the crypto market, it's worth taking the time to properly protect your wallet. Market experts know that cryptocurrencies can be stored in two types of wallets—the so-called hot wallet and the cold wallet.

The main difference is that hot wallets are connected to the internet, while cold wallets remain offline. This makes hot wallets more convenient to use, but less secure. The risk of a cold wallet being hacked is much lower than that of a hot wallet.

Another difference is the price. Most hot wallets are free. Cold wallets typically cost a few hundred to even a few thousand. For this reason, cryptocurrency investors often wonder when the security of a cold wallet becomes worthwhile.

What makes a cold wallet the best option for securing cryptocurrencies?

When you buy cryptocurrencies, you have several storage options:

Store them where you bought them. Some of the best cryptocurrency exchanges store coins in their own cold wallets for security. However, this is not recommended. The exchange technically controls your cryptocurrency, and there is also the risk of your account being hacked.

- Move your cryptocurrencies to an independent hot wallet, i.e., a digital wallet on the internet, on a computer or smartphone.

- Move it to a cold wallet, i.e., a type of storage that is not connected to the internet. The most common types of cold wallets are hardware wallets (devices designed for storing cryptocurrencies).

Both hot wallets and cold wallets store your private keys, which grant you access to your cryptocurrency. If someone else gains possession of your private keys, they can steal your cryptocurrency.

Although many people use hot wallets without problems, there are risks involved. The company behind the hot wallet stores your private keys on its web servers. If these servers are hacked, your private keys could be compromised. There is also the possibility that the device on which your hot wallet is stored is infected with malware.

A cold wallet eliminates this risk. Your private keys are stored offline within the wallet. Even when the hardware wallet is connected to your computer, your private keys never come into contact with your computer. You can connect a cold wallet to a malware-infected computer without putting your cryptocurrency at risk.

When should you use a cold wallet?

As a rule of thumb, you should use a cold wallet if you own more cryptocurrency than you could afford to lose. For small amounts of cryptocurrency, a cold wallet isn't necessary. It makes no sense to pay a few hundred Swiss francs or euros to protect cryptocurrency that's only worth a few hundred francs or euros.

Considering the price range for cold wallets, you should consider purchasing one if you hold a significant amount of cryptocurrency. A cold wallet is also a good idea if you plan to invest regularly in cryptocurrencies. Everyone has a different risk tolerance, and there's no one-size-fits-all answer. However, given that cryptocurrency prices can fluctuate dramatically, it's wise to exercise caution. A one-time purchase of a wallet for a few hundred Swiss francs or euros isn't much considering how valuable cryptocurrencies can be.

Take some time to research and read reviews before buying a cold wallet. Each cold wallet has a different design and features. The types of cryptocurrencies you can store also depend on the wallet you choose. Compare your options to find a cold wallet that suits your needs.

Private user keys - your code for a cold wallet

When you buy cryptocurrency, you receive two keys: a public key, which functions like an email address (meaning you can safely share it with others – this allows you to send and receive funds), and a private key, which is usually a string of letters and numbers (and which you should never share with anyone). Think of the private key as a password that unlocks a virtual vault containing your funds. As long as only you have access to your private key, your funds are secure and can be managed from anywhere in the world with internet access.

The public and private key system is one of the cryptographic innovations that enable the existence of digital money and guarantee its security:

Cryptocurrencies are decentralized. This means that no bank or other institution holds your digital money. Instead, your cryptocurrencies are distributed across a network of computers using a technology called blockchain. One of the characteristics of the cryptocurrency blockchain is its openness: all public keys and transaction information are accessible to everyone.

- Using complex mathematics, a public key is generated from a private key, and then the two are paired. When you carry out a transaction with your public key, you confirm your identity with your private key.

Everything is both public and anonymous - you don't need to provide your name, address, or any other information to use cryptocurrencies.

Although everyone can see when Bitcoin is bought, sold or used, only the owner of the private key can execute and view their transactions.

Where should private keys be kept?

As with any password, it is very important to ensure the security of the private keys. The two most important ways to protect them are:

- Online storage in a secure cryptocurrency wallet. In this case, it is advisable to choose an exchange-independent wallet offered by a company with a strong track record in security and features such as two-factor authentication (2FA).

- Offline storage in a secure location - in this case, the private key is stored in the form of a code in a form and location that provides adequate physical security.

Depositing your cryptocurrency wallet or private keys in the Safebox24 vault

If you opt for a cold wallet, it's advisable to store both the wallet and the private key in one location, such as a safe deposit box in a certified vault. The solution offered by Safebox24 provides the convenience of security along with 24/7 access.

In the case of cryptocurrencies, you can store, among other things, the following in the safe:

- Logins and passwords for your Hot Cryptocurrency Wallets;

- Cold wallets for cryptocurrencies;

- Private keys in the form of an access code to your cold cryptocurrency wallets.

It is important that you have unrestricted access to your safe deposit box. Safebox24 safes are available to customers 24 hours a day, 365 days a year. Access to the safe and the safe deposit box is granted after signing a contract using biometric keys – a facial scan (Face ID) and fingerprints (Touch ID). From that point on, Safebox24 users have unlimited, discreet, and independent access to their safe and safe deposit box.

Every Safebox24 safe deposit box is insured. You can choose the sum insured and insure the safe deposit box for up to €500,000 without disclosing the contents. You don't have to tell anyone what you keep in your safe deposit box.

About Us

Safebox24 is one of the largest independent vault operators in the European Union and the first privately owned, automated vault operator in Switzerland. Since 2019, we have offered vault storage in modern, certified facilities, along with a customized Lloyd's insurance policy, professional service, and 24/7 access for customers.