The biggest challenge facing most altcoin owners is finding a safe place to store their cryptocurrency.
There are three popular methods of storing digital currency out there. Here are the pros and cons of each.
There are a wide variety of digital wallets or computer wallets designed for cryptocurrency storage. These include cloud based solutions including Bitcoin Wallet which stores altcoins in the Blockchain. There are also desktop wallets that you can install on your phone or computer.
Digital wallet advantages include:
- No restrictions on use.
- Can be installed on most devices.
- Anonymity you will not have to reveal your identity, address, or banking information.
Digital wallet disadvantages include:
- Currency use can be tracked.
- Vulnerable to hacking and malware.
- Some of them can be complex and hard to use.
- Recovery of lost, missing, or stolen altcoins can be hard.
- No offline storage available.
Popular exchanges such as GDAX which operates Coinbase and CEX.IO offer free storage of cryptocurrencies as a promotion for their trading accounts. Most exchanges offer a cloud a cloud-based digital wallet.
Exchange advantages include:
- MasterCard and Visa transactions available.
- Bank transfers might be available.
- Trading availability.
- Easy to use.
- High level of security.
- Fast conversion to fiat currencies (paper money) available.
Exchange disadvantages can include:
- No anonymity you will have to reveal your identity, banking information, address, and credit-card information.
- Exchanges operate on centralized servers that are a big target for hackers.
- May charge hidden fees for trading.
- Limited number of cryptocurrencies accepted. Most exchanges only work with Bitcoin and Ethereum.
- There can be restrictions on where their services are available.
- No offline storage available.
Cryptocurrency Hardware Wallets
Hardware Wallet Advantages include:
- You can store cryptocurrency totally offline.
- Altcoins are safe from hackers and Malware as long as the wallet is not connected to the internet.
- Unlike USB drives, hardware wallets are password protected.
- Some wallets like the TREZOR are waterproof and rugged enough to survive being dropped.
- You control access the wallet.
Hardware Wallet Disadvantages include:
- The variety of altcoins that can be stored on wallets is limited.
- Recovering cryptocurrency can be a hassle if the wallet is lost, stolen, or destroyed.
- Coins can be lost if the wallet gets stolen.
- Some people find the screen on the wallet hard to use because of the small size.
Many people have heard of a storage solution called a paper wallet. There is no such thing as a paper wallet.
The solution is actually a digital wallet that you need a key or code to access. The key or code is printed or written out on a piece of paper - hence the term “paper wallet.”
A paper wallet is not a wallet because the cryptocurrency is actually stored in the cloud. It is also very vulnerable to theft because anybody that gets their hands on the paper can take the altcoins from the wallet.The most secure storage solution for most cryptocurrency users now is a hardware wallet.