Hardware Wallets
Learn, Security 2018-02-16Although this article is about hardware wallets first we consider the simpler option,
Holding your cryptocurrency on an Exchange
This is considered undesirable because exchanges are poorly regulated and might steal or lose your money. However for novice users and small amounts a regulated exchange like Coinbase is a good choice because it is very simple and your are less likely to lose you money by mistake.
Using a hardware wallet
The more difficult and secure solution is holding your cryptocurrency yourself. Your holding of a cryptocurrency is recorded on a blockchain. This is simply a public database that can be securely updated by a piece of software called a “wallet”. This analogy is unhelpful to the user because it sounds like the “wallet” has your money in it but it does not because your money is in an account on the blockchain. If the blockchain is your Safety Deposit Box then the wallet is where you keep your Private Key. If anyone get hold of your Private Keys they can simply open your Safety Deposit Box and take your money.
Your Private Key is only safe if it never entered into a computer. To keep it safe you need a hardware wallet – this is a USB-stick-like device with a small user interface to let you see the key and confirm transactions. The two leading products are,
and will be sufficient for most users needs.
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