How to Safely Store Your Cryptocurrencies

Disclaimer: This article is intended for informational purposes only and does not constitute a solicitation to buy or invest in ZEN. I work for the Horizen Foundation, but this article does not represent an official source of information from the foundation. It is important to conduct your own research before making any financial or investment decisions.

This article is also available in French.

Spiderman warned us: with great power comes great responsibility. The financial independence brought by cryptocurrencies makes this expression very popular — and rightly so. In this article, we will see how to handle your cryptocurrencies with care and provide tips on how to store them securely.

Storing Your Cryptocurrencies Safely

Before diving into the details, it’s important to recall a few key concepts. This article is aimed at both seasoned users and newcomers. In this section, we’ll explore what a blockchain address is (public key and private key), which will naturally lead us to explain how to keep it secure.

How Does a Blockchain Address Work?

• A public key, which allows you to receive funds. Think of it as a transparent mailbox: everyone can see what’s inside if the address is known.
• A private key, which must always remain private, as its name suggests. It’s like the key that allows you to access the contents of the mailbox, and therefore to move what’s inside.

How Do Cryptocurrency Wallets Work?

Cryptocurrency wallets group together your private and public keys. Some allow you to store multiple different cryptocurrencies, while others do not, and none allow you to store them all. The choice of wallet will depend on your needs.

Distinguishing Between Custodial and Non-Custodial

It’s quite simple. A wallet is considered custodial when the provider holds the private key, such as with all hot wallets, which we will discuss shortly.

A wallet is considered non-custodial when you hold the private key, which is the case for software wallets and cold wallets, as we will also cover later in this article.

In the case of software, the private key is stored in a folder on your computer. You can choose the location. However, a hacker could still access it. It’s up to you to select the safest folder to store it in, which involves significant responsibility. To best protect yourself, you can store it in your computer’s secure enclave if it has one. In this case, just like with a cold wallet, the private key will only be revealed when you access your wallet.

These non-custodial wallets can also be full nodes, which, in addition to giving you access to your cryptocurrencies, maintain a complete copy of the blockchain. Besides having total control over your private key, full nodes also contribute to the security of the underlying blockchain.

This is the case with Sphere By Horizen, the non-custodial wallet for storing your $ZEN and a copy of the main Horizen chain (current, before the transition to Horizen 2.0).

What Is a Hot Wallet?

Hot wallets allow you to access your funds quickly.

CEXs (centralized exchange platforms) are custodial hot wallets. The private keys are always accessible, and protected by the provider within the wallet.

This means that you do not control your funds.

If the exchange platform were to go bankrupt or get hacked, you would lose all your funds. This is what happened with Mt Gox, although those affected were fortunate enough to see their funds reimbursed — after 10 years.

DEXs (decentralized exchange platforms) are non-custodial hot wallets. You control your funds, but the risk of attack is higher than if the keys were stored in a cold wallet.

What Is a Cold Wallet?

Cold wallets offer better protection for your cryptocurrencies.

In this case, the private key is stored on a hardware device. This could resemble a USB stick; the most well-known are Ledger, Trezor, and CoolWallet. The private key is stored within the device, meaning a hacker cannot access it remotely. The only time a hacker could access the wallet remotely is when you are using it when it’s connected to your computer. This greatly limits the risks.

However, you should still hide this hardware device in case a savvy burglar is looking for it.

A paper wallet is also a type of cold wallet. In this case, the private key is stored on paper. It will be up to you to hide this paper (which could also be another medium, like metal).

Cold wallets are inherently non-custodial.

What Is a Browser Wallet?

Browser wallets are found on your web browsers. These are hot wallets where the key is secured by the wallet provider. They can be custodial or non-custodial. In the case of a non-custodial browser wallet, you will need to keep the private key secure.

Horizen EON is accessible from EVM browser wallets like Rabby or MetaMask.

It’s possible to link a browser wallet to a cold wallet. In this case, your cold wallet will be necessary to validate transactions made from the browser wallet. This is a good compromise for easily using your cryptocurrencies online while ensuring their security.

How Do I Keep My Private Key Safe?

As we’ve seen, your computer, browser, exchange platform account, or browser wallet can all be targets for attacks.

It’s advisable to note the private key on a medium that is resistant to fire and floods and to keep it secure. It’s not recommended to store it on a Drive.

You can engrave the key on metal, for example, or make several copies and give them to trusted people (with very high trust, as this grants access to your funds).

How Do I Protect My Cryptocurrencies?

The types of attacks increase with the creativity of scammers, their history of success, and their adaptation to new protection methods.

I’ve already written a detailed article (which doesn’t claim to be exhaustive) on the most common scams encountered in the DeFi space.

Here, I’ll simply list the precautions to take.

How to Protect Yourself in the World of Cryptocurrencies

• Prioritize cold wallets or, at a minimum, non-custodial wallets. This allows you to control your funds and limit attacks.
• Never accept a transaction if you don’t know its origin.
• Don’t participate in every airdrop that comes your way, or follow the rule: one airdrop, one new wallet.
• NEVER accept help from a support service via DM.
• ALWAYS verify information on the official sources of the project.
• Do your research before investing.

Cryptocurrency is trading accessible to noobs — we all started as noobs. You can’t enter this space without taking the time to learn.

Take time to read articles (which ties into the previous point, but I like to emphasize it).

Be especially vigilant when a project announces an airdrop, a testnet, or a mainnet (if you don’t know these terms, it’s time for your first solo research to learn them).

Remember, always: “Not your keys, not your coins.”

Join communities, but still verify the information. Even though I find that most communities are rather friendly, this isn’t the case for all of them. Join as many communities as possible.

And finally, take TIME. Investing in cryptocurrencies cannot be a 30-minute-a-week activity. The investment should also be in acquiring knowledge. If you don’t have the time to read, learn, or join communities, it’s simple: don’t invest.

I hope this article has inspired you to learn and be particularly careful about how your keys are stored and how you access your cryptocurrencies. As always, I’m available to answer your questions and listen to your comments, so don’t hesitate to reach out.