We talked last week about good practices in email address management and crypto exchanges. It’s time to move on!
Keeping your bitcoins and other cryptocurrencies for the long term, leaving them on the exchange platform where you bought them is high on the list of bad ideas for managing your crypto-heritage. As ergonomic and easy as it may seem, this option presents many risks, including two main ones:
- Let the platform in question get hacked,
- Let your account itself get hacked.
There is an adage made famous by Andreas Antonopoulos in the world of cryptocurrency: “Not your keys, not your Bitcoin”. From the moment you do not have the private keys associated with your bitcoins, your bitcoins are not really yours (because a risk of hack exists). In other words: you are the owner of your bitcoins and other active crypto only to the extent that only you keep the keys.
If you do not want to trade in the short term or if you want to “Buy & Hold” (keep your investment in the long term), it is therefore much more prudent to store the private keys of your cryptocurrencies securely on a hardware wallet or “Cold storage” in our beautiful language.
What is a hardware wallet?
A hardware wallet is a physical wallet which can for example take the form of a secure USB key as for Ledger Nano S or X. The hardware wallet allows storage for each address the public key (the address of the wallet) and the private key (only known to the owner of the wallet). The hardware wallet is a simple and secure way to store your cryptocurrencies in cold storage. This means that the private keys of your cryptocurrencies are no longer stored online but offline, so no one can hack them.
Which hardware wallet to choose?
Personally, I use a Ledger Nano S and I recommend this model or the Ledger Nano X (new version of the Nano S). To get started with your Ledger Nano, you will find a very detailed tutorial written by Coinhouse. I also invite you to read the Ledger FAQ if you have any questions.
Where to store your hardware wallet?
I recommend you to store your hardware wallet in a safe place like a safe in your home or a bank vault (the rental costs a hundred euros per year, so it all depends on the value of your active crypto).
What happens if I lose my hardware wallet?
When you configure your Ledger for the first time (this is normally also the case with other hardware wallets), a list of 24 words communicated to you (this list can be reset later). It is essential to write these 24 words on a sheet of paper. For the most meticulous of you, you can laminate this sheet, you never know with humidity. This 24-word list is very important: it will allow you to access your cryptocurrencies stored on your Ledger if you forget 8-digit PIN code of your Ledger or if you lose it. If such a thing happens, don’t worry: just type this word list on a new Ledger to recover your cryptocurrencies.
Where to store my 24-word list?
I advise you to store this sheet with the list of 24 words in another safe place, separate from the one where your Ledger will be stored (another safe for example?). You can duplicate this list of 24 words and store it in several boxes, but keep in mind that if someone comes across it, they will generate your private keys and therefore take control of your cryptocurrencies stored on your hardware wallet.
Because it is one of the benchmarks (if not the leader) on the hardware wallet market. Besides Ledger is a French brand. And finally it offers several original features:
- 1- The possibility of configuring a 25th custom word (in addition to generating the 24-word recovery list), here is a tutorial if necessary.
- 2- The possibility of configuring 2 different and separate spaces on your Ledger: one space corresponds to the list of 24 words, the other space corresponds to the list of 24 words + the 25th personalized word (see point 1-). These 2 spaces are accessible via 2 different 8-digit PIN codes.
- 3- The application desktop Ledger Live (also available on iOS and Android smartphones) to easily interact with your Ledger from your computer.
Where to buy a Ledger Nano X or Ledger Nano S?
Directly on the site of Ledger Or on Amazon (absolutely choose Ledger as seller on Amazon). Please note: for security reasons, never buy a used Ledger, it must absolutely be new!
Other Cold Wallet brands
If ledger is market leader and is also one of the French nuggets of recent NEXT40 national group which brings together the 40 most promising start-ups, other material options exist.
We obviously think of the Cold Wallet Trezor which is a bit to Ledger what the PC is to Apple… But also the Archos Safe-T or the Keep-Key.
These different options will be the subject of articles dedicated to the future on Bitcoin
Disclaimer: The advice in this article is intended to significantly reduce the risk of theft or piracy of your active crypto. However, keep in mind that zero risk does not exist in IT security.
Ex-Product Manager of Paymium and Blockchain.io, 2 cryptocurrency exchange platforms based in France. I wish to share the knowledge acquired during this experience with the crypto community, and also a wider audience discovering Bitcoin and blockchain technology.