Protecting your Cryptocurrency
In order to protect your cryptocurrency, you must have a wallet. The wallet saves your private key and public address which helps you store, send, and receive cryptocurrencies. Even though this should be very clear to you, let’s a do a quick run-through of what private key and public address mean:

Private Key: The private key gives you the right to access and send your money.

Public Address: This is the address where everyone will send you money.

One key thing to remember before we continue, the public address is the one that you will give to others in order to send your money.

DO NOT and we repeat DO NOT give out your private key. The private key is for you and you alone. If you give out your private key to strangers, then they will gain access to your money.

Let’s hope we have made that sufficiently clear.

Public Address: Give out to everyone
Private Key: If you give it out to everyone then you’re screwed

Alright, let’s move on.

All crypto wallets fall into the following two categories:
  • Hot Storage.
  • Cold Storage.
Hot Storage Vs Cold Storage
Before we go deep into them, let’s use an analogy to help understand the difference between the two. The hot wallet is like the wallet you carry around in your pocket. It gives you easy access to your cash but, it is pretty vulnerable.

The cold storage, on the other hand, is like your savings account. Highly impractical for day-to-day use BUT it is extremely safe when you compare the two.

Hot Storage
A wallet that is connected to the internet is termed as “hot storage.” The following are examples of hot wallets:
  • Exchange wallets.
  • Desktop and mobile wallets.
  • Multi-Signature wallets
Before we get deep into each of those wallets, let’s go through the pros and cons of hot wallets.

Pros of Hot Wallets
  • It gives you quick, easy, and instant access to your funds.
  • Gets easy support in different devices.
  • Very user-friendly and ideal for beginners.
Cons of Hot Wallets
  • Vulnerable to hacks and cybercrime.
  • Unless the keys have been carefully backed up, if the device is damaged then the wallet will be damaged as well.
  • The device in which your hot wallet is saved like your laptop, phone, etc. is susceptible to physical robbery as well.
So, now that you have a general idea of what a hot wallet is, let’s go through some of the more popular types of hot wallets.

Hot Wallet: Exchange Wallets
This is the easiest wallet that you will ever create. In fact, if you have been following our instructions and have created your Coinbase account then guess what? You have created your exchange wallet already!

The advantages are obvious. It is already linked to your account and gives you quick and easy access to trading. HOWEVER, this also means that you are vulnerable to attacks. Remember, exchanges are a constant target for hackers. We would recommend that you don’t keep a major chunk of your cryptos in exchange wallets, keep only as much as you need for trading.

Hot Wallet: Desktop and Mobile Wallets
Desktop and mobile wallets have grown in popularity. Desktop wallets offer more security than exchange wallets. Setting them up is very simple as well. All that you need to do is to download the client on your laptop/desktop and you are done! MultiBit provides an excellent desktop wallet to store Bitcoins.

However, there is a problem with desktop wallets. They are not the most flexible options. After all, you can’t access your desktop wallets from any other desktop apart from the one that you have downloaded it in.

This is why, for more users who want flexibility, mobile wallets are a pretty convenient option. Setting up is as simple as downloading an app into your phone. MyCelium is a pretty popular mobile wallet for both Android and iOS.

The problem with both these wallets is that since they are stored in a device that is connected to the internet, they are vulnerable to viruses and hacks.

Hot Wallet: Multisignature Wallets
Have you ever seen one of those old school safes which require multiple keys to open? Or what about those treasure chests which need 3 or 4 people to put in their keys and unlock at the same time?

That will give you an idea of how Multisignature wallets or multi-sig wallets work. Most of the ICOs use multi-sig wallets to collect and store their funds. So, why would one want to use multi-sig wallets?

  • To protect from corruption: We have all heard stories of ICOs getting millions of dollars in their crowd sale. What is to stop all these developers from taking the money and run away? Human greed is powerful after all. In situations like these, it is far more prudent to accept funds in a multi-sig wallet where all the money and power won’t rest on one human being.
  • More Security and Assurance: Since the funds are in a multi-sig wallet, they will automatically be more secure because they are no longer dependent on the whims of one person. Plus, if I am sending my money to a multi-sig wallet address, then even I will feel reassured that my funds are not being mishandled.
Cold Storage
While hot wallets give you great accessibility, the fact remains that they are extremely unsafe. That’s why it is more prudent to save the majority of your funds in a cold storage wallet. A cold wallet is completely cut off from the internet, which automatically keeps it safe from hackers and viruses.

Examples of cold storage wallets include:
  • Hardware wallet.
  • Paper wallet.
Before you learn how to set up each of the above, let’s understand the pros and cons of cold wallets.

Pros of Cold Storages
  • 100% safe from hackers and viruses.
  • A great place to store and HODL your coins for a long period of time.
Cons of Cold Storages
  • Extremely impractical for daily transactions.
  • Not beginner-friendly.
  • It is still vulnerable to human carelessness.
Alright, so now that that’s taken care of, let’s understand how to set up cold wallets.

Cold Storage: Hardware Wallets
Hardware wallets are physical devices where you can store your cryptocurrency.

The most common form of hardware wallets is the USB style which has been championed by the French company Ledger. The reason why hardware wallets have become so popular is that they give you the storage and security capabilities of a cold wallet while making transactions stupidly simple and straightforward. Basically, it works around and negates the biggest disadvantage of cold wallets.

Pros of Hardware Wallets
  • Since it’s a cold wallet your private key will be safe and secure. The keys are stored in the protected area of a microcontroller and cannot be transferred out of the device
  • They are designed to be sleek and can be carried around easily.
  • Transactions are extremely easy. All that you have to do is to plug in the wallet and then follow the instructions given to make your transactions. The UI interface of the wallets is very user-friendly.
  • Extremely safe and secure. As of writing, there have been no instances of a hardware wallet hack.
  • Has the capability to store multiple addresses for you to send your funds over.
  • The wallet is Pincode protected, so even if it falls on the wrong hands, they won’t be able to access your funds. Entering the wrong pin code 3 times will shut down the wallet. In the event of a shutdown, you can still recover your funds by following the restoration details.
Cons of Hardware Wallets
  • As with all products, these wallets may also have design flaws. Recently, a design flaw was discovered in Ledger which made it potentially vulnerable. Ledger has addressed the issue since then.
  • It is an actual physical object, which means that it can be stolen from you or it can get damaged.
  • They are not the most versatile when it comes to storing cryptocurrencies. Trezor stores 10 kinds of coins while Ledger stores around 23.
  • Finally, you will have to trust that the company which is creating your hardware wallet is ethical and will not try to mess with the design of your hardware wallet. It asks for trust in an environment which should be trustless.
So, now that the pros and cons have been addressed, let’s see how we can set one up! Without a doubt the two most popular hardware wallets in the world are Trezor and Ledger Nano S.

Trezor
Trezor is a company based in Prague, who has made one of the easiest and simplest to use Hardware wallets ever. It really is stupidly simple to use and the design is so sleek and light that you can carry it anywhere with you. It is compatible with windows, mac, and Linux, and using it is a simple matter of plugging it in your laptop and connecting it with one of the following interfaces:
  • My Trezor.
  • Multibit.
  • Electrum.
Ledger Nano S
Ledger, is a Paris-based company and they have given the crypto-community one of the easiest-to-use, sleek, and popular hardware wallets. They save all your data inside a smartcard which keeps it safe from hackers. Using it is a simple matter of plugging it into your laptop and connecting it to one of the following interfaces:
  • The Ledger Wallet, which you can download from chrome extension.
  • Mycelium
  • Electrum.
  • Green Address.
  • Greenbits.
  • CoinKite
  • Copay
  • MyEtherWallet
Setting it up is pretty straightforward.

Cold Storage: Paper Wallets
It could be argued that paper wallets are, hands down, the safest way to store your cryptocurrency. The idea of a paper wallet is very simple. You set up a wallet offline while following some simple instructions and then you simply print out the private and public keys in a piece of paper. The keys will also be printed in the form of a QR code which you can scan in order to get access to your funds.

So, the question that you must ask now is, do you need a paper wallet?

The short answer….depends.

Are you planning to use your funds in a fairly regular manner? Then no. Paper wallets will be a pain if used like that. It is better for you to get a hardware wallet then.

However, if you are planning to just store your funds for a long time then, without a shadow of a doubt, paper wallet is the way to go.

There are two paper wallet sites that we would like you to check out:
  • Walletgenerator.net
  • MyEtherWallet.com
Walletgenerator
If you want to make a paper wallet, then Walletgenerator will give you the easiest interface to work on plus they give you the option of creating multiple paper wallets and support 197 different currencies. Some of the major ones that they support are (in alphabetical order):
  • Bitcoin
  • Bitcoin Cash.
  • Dash.
  • Litecoin.
When you have made your wallet here, you will get something like this:

You may print this page and store it in a safe. Please ensure that your printer is not connected to the wi-fi when you do so to ensure added security.

MyEtherWallet
If you want a paper wallet that supports Ethereum and Ethereum-based tokens, then MyEtherWallet is the best option out there.

When you are done creating the MyEtherWallet you will get the following:

Like before, you may print this and store in a safe and, once again, make sure that your printer is not connected to the wi-fi.

Restoring a cold storage wallet
When you want to bring your cryptocurrency back out of cold storage, you need to import the private key into a suitable online wallet. Any wallet which supports importing private keys will work. The process is simple and intuitive for most wallets. The steps we have given below correspond to using the Bitcoin Unlimited wallet.
  • Open the client and click on “Help”.
  • Select the Debug Window and click on the Console tab.
  • Type in the field “importprivkey<private key>” replace <private key> with your private key and the remove quotation marks.
  • Hit enter.
This will import all the data from your paper wallet to your online desktop client.

However, do keep in mind that doing so will mean that your funds are immediately exposed to the dangers of a hot wallet.