How to Keep Your Skycoin Safe
Six options for storing your coins
Anyway, regardless of how the coins ended up in your possession, you’ll need to decide how to store them. There can only ever be a maximum of 100 million Skycoin in existence. That’s less than half a coin for each adult in the USA. So if you’re lucky enough to own a few, you’ll want to keep them safe!
Fortunately, you have a number of options. You can keep your coins on an exchange, a mobile wallet, a desktop wallet, a Skycoin hardware wallet, a Ledger hardware wallet, or a paper wallet.
Before we begin, for the sake of clarity it’s important to understand that your coins are never actually ‘on’ the wallet, despite this being the commonly used expression. In reality, your coins are always stored on the Skycoin blockchain, and the wallet simply provides a mechanism to access those coins while protecting your private key.
OK, so let’s look at the six options for storing your Skycoin.
1. On an Exchange
We’ll get this one out of the way first. An exchange is the worst possible place to store your coins!
“Not your keys, not your coins” is an often-heard warning among the crypto community. If your coins aren’t in a blockchain address to which you and only you hold the private key, then they’re not really your coins.
Most cryptocurrency exchanges have been hacked, and many have exit-scammed (stealing all their customer’s funds). Also, if your coins are on an exchange, then the exchange will keep your precious Coin Hours (this might change in the future when Coin Hours are listed on exchanges).
So you should only keep coins on an exchange if you’re actively day-trading them. Otherwise, get them off the exchange and into one of the following five types of wallet right away.
2. Skycoin Mobile Wallet
The Skycoin mobile wallets for iOS and Android devices offer a convenient way to store a small amount of Skycoin. Why just a small amount? Because mobile devices are easily lost or stolen, and even though your device (and the wallet itself) may be protected by a PIN code, they’re still easier to hack than desktop wallets. Treat a mobile wallet like you’d treat a regular wallet — only keep enough funds in it for daily purchases.
Mobile wallets are also handy when you want to tell your friends about Skycoin, and show them how fast the transactions are. Just ask them to download the mobile wallet from the app store, and then send them a couple of $SKY. After a few seconds they’ll receive the coins and start accumulating their own Coin Hours. This is a great way to get others interested in Skycoin.
3. Skycoin Desktop Wallet
The Skycoin desktop wallets for Linux, Windows and MacOS are where most people store their coins. Desktop wallets make it easy to send Skycoin from one address to another, as well as to and from exchanges. They’re generally safer than mobile wallets too.
Nevertheless, there’s always a risk that your PC might be stolen, or it could be compromised by keyloggers and other malware. So for long term storage, it’s still best to use one of the next three options.
4. Skycoin Hardware Wallet
Skycoin is unique among cryptocurrency projects in having its own dedicated hardware wallet. The Skycoin Hardware Wallet is expected to be available for purchase in Q2 2019, and will retail for approximately $30. It will initially store only Skycoin, with support for Bitcoin, Bitcoin forks, Ethereum and ERC20 tokens being added in the future via firmware updates.
There are several advantages to keeping your coins on a hardware wallet:
- Your private keys are never exposed to the Internet
- The hardware is immune to viruses and malware
- Transactions require a physical button-press on the device
- The wallet is also protected by a PIN
This means hardware wallets are impossible to hack. Even if your PC is compromised by malware, your private keys held on a hardware wallet are never exposed.
5. Ledger Nano
The Ledger Nano is another popular hardware wallet that can hold a wide range of cryptocurrencies. Skycoin integration with the Ledger Nano is currently underway. However, Ledgers are considerably more expensive than the Skycoin Hardware Wallet.
6. Paper Wallet
A paper wallet simply means you write down your private key (seed phrase) on a sheet of paper. No matter which type of wallet you use, you should write down the seed phrase anyway and store it somewhere safe (in case you lose the regular wallet).
Some people go one step further and keep only a paper wallet. You can do this by using a mobile or desktop wallet to create your seed phrase, write down the 12 words, and then delete the wallet application and all associated files. For extra protection, create the seed phrase using a device that’s not connected to the Internet (to understand how this works, read this excellent article by Skyfleet member Fray).
But remember, if you lose those 12 words, then you won’t be able to access your coins. You’ll still be able to see them, sitting on the blockchain, but you’ll never be able to move or sell them again. How frustrating would that be!
That’s why it’s wise to store at least two copies of your paper wallet in different locations, in case one is lost or damaged by fire or flood. But if somebody else finds your seed phrase, then they can take all your coins. So here are some ideas for keeping your Skycoin paper wallet safe.
- Lock the sheet of paper in a fireproof safe.
- Bury it in the garden in a waterproof container.
- Engrave your seed words on Cryptosteel.
- Split the twelve words into two sets of six, and store each set separately. This way, if somebody finds one half, they still won’t be able to access your coins. You could keep one half in a safety deposit box at your local bank.
- Write a short story that uses each seed word as the third word of each sentence, or the third word of each paragraph. Keep it in a folder with lots of other short stories so it doesn’t look out of place.
Or if you’ve got a great memory, you could memorize the seed words using a mnemonic peg system. But this could be tricky if you have multiple wallets.
As you can see, there are many ways to store your Skycoin. Some options are safer, while others are more convenient.
Ideally you should have multiple wallets, since it’s never a good idea to keep all your eggs in one basket. You might store 5% of your stack on a mobile wallet, 20% split between a few desktop wallets, and the remainder on a Skycoin Hardware Wallet that you keep locked in a safe. If you’re an active trader, you might keep your trading stack on an exchange.
One last point. No wallet will protect your Skycoin in the event that a thug threatens you with a wrench and demands your private key. If you’re worried about this possibility, then keep a sacrificial wallet with a small number of Skycoin that you’re willing to give up in exchange for your life. And don’t ever paint a target on your back by telling others how much Skycoin you own!