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Amidst the surge in the DeFi sector, signaling its ongoing dynamism and the concurrent robust growth in Total Value Locked (TVL) across the top blockchains, cryptocurrency investors find themselves in a quest for reliable methods to ensure the safety of their cryptocurrency portfolios. 

Delving into the current implications for cryptocurrency investors, in this article we examine the most reputable storage solutions for safeguarding your digital assets.

Types of Cryptocurrency Storage

Centralized Exchange Wallet

Popular among beginners in crypto trading Centralized Exchange (CEX) offers a custodial storage of digital assets. Upon user registration on a Centralized Exchange platform, an associated wallet is assigned to the user’s account. These wallets are primarily utilized for trading and storing cryptocurrencies, remaining interconnected with the infrastructure of the exchange.

While centralized storage provides users with convenience and assistance, it’s essential to note that third-party entities also hold the private keys and personal data required to access and manage the account’s funds. Thus, custodial CEX wallets involve a trade-off between user convenience and the potential compromise of security and privacy. Trust becomes a critical point in navigating the balance between convenience and the safeguarding of sensitive information on those types of crypto exchange platforms.

Hot Wallet

Hot wallets are online software linked to the cryptocurrency infrastructure, serving as the interface for accessing and storing cryptocurrency funds. In the broader context of the cryptocurrency network, these wallets play a pivotal role in facilitating any alterations to the transaction record maintained on the decentralized blockchain ledger for the specific cryptocurrency in use. 

Commonly referred to as a non-custodial wallet, this type of cryptocurrency storage allows users to gain control of the private key, utilizing the unique seed phrases, 2FA to access accounts holding crypto assets. The private keys are stored within the dApp or software itself. Non-custodial wallets are frequently integrated with DEX, OTC, and other DeFi platforms, enabling users not only to privately store funds but also trade and trade and invest directly using the funds from their accounts. Such decentralized methods of storing your crypto significantly lower the risk of cybersecurity threats, however, you should always be cautious when signing the transactions and connecting to new DApps on the blockchain. 

Cold Wallet

A cold or hardware wallet represents a tangible device designed for the offline storage of cryptocurrency, it is usually made in the form of a USB drive. Remaining disconnected from the internet, it provides an unparalleled level of cryptocurrency storage safety. The concept of isolating storage is surely not a novice solution to the DeFi space, but it still provides the highest level of security, ensuring privacy and minimizing exposure to fraud threats, including the risks associated with malware attacks. When users intend to execute a transaction, they have the option to connect funds from their cold wallets to a computer or mobile device. This practice ensures the security of the user’s cryptocurrency funds, even when engaging in online transactions.

Security Fundamentals

Select a reputable source. Choosing a trustworthy and secure wallet, whether it’s a hardware or software option, is crucial for storing your cryptocurrencies safely.

Ensure additional security. Add a level of security to your cryptocurrency accounts by using not only a robust and unique password but also enabling two-factor authentication (2FA) for an additional layer of protection.

Choose privacy. Non-custodial accounts guarantee that only the user can access sensitive data associated with their account. However, it is crucial to refrain from using public Wi-Fi networks when accessing your cryptocurrency account, as they expose users to potential threats of data leakage.

Stay informed. It is vital to monitorthe latest cryptocurrency security best practices and emerging threats. Continuous education is key to navigating the ever-evolving landscape of digital assets.

Back up. To safeguard your investments, make it a routine to regularly back up your wallet’s private keys or seed phrases. Store these backups in multiple secure locations to mitigate the risk of potential data loss.

Diversifying storage solutions is the key

So, what constitutes the most secure approach to storing your cryptocurrency? Arguably, a hardware wallet remains one of the safest options. However, the efficacy of cold storage relies on meticulous usage.

Consequently, the method highly endorsed by cryptocurrency professionals is the utilization of at least two distinct types of storage, thereby diversifying assets across multiple facilities. By adopting a diversified approach to cryptocurrency storage, users can mitigate the risk of losing their entire holdings in the event of a compromise in one storage option.

For example, given that hot wallets are already connected to the internet, they prove convenient for interactions with exchanges for withdrawals or deposits, or when utilizing decentralized applications (dApps). A hot wallet becomes a suitable choice for managing active funds intended for actions like exchanging, staking, or farming crypto. However, for substantial amounts designated for long-term holding, it is advisable to transfer them to a cold wallet, enhancing overall security. The funds can be conditionally divided into ‘active funds’ and ‘holdings,’ and then distributed across multiple storage solutions to ensure heightened security.

Nevertheless, striking the right balance between complexity and security is crucial. Bear in mind, that losing access to your accounts, funds, or wallets is just as commonplace as security breaches.

Put your crypto funds into action 

Upon registering an account on the MaxSwap service, our users are promptly equipped with a non-custodial wallet, ensuring they maintain complete control over their private data and funds. This integrated software wallet enables the storage of cryptocurrency within the exchange infrastructure, essentially positioning MaxSwap as a hot wallet provider.

Storing your cryptocurrency within MaxSwap offers a significant benefit – immediate management of your funds. The service provides users with the flexibility to diversify their portfolio by seamlessly exchanging between various cryptocurrencies at the best rates, utilizing real-time data from the crypto OTC market. The MaxSwap introduces an opportunity for frictionless swaps involving substantial amounts, facilitated by its cross-chain aggregated deep liquidity pools.

Prioritizing safety? You can add funds conditionally with MaxSwap’s fiat on-ramp feature that allows users to deposit funds through trustworthy international payment systems, making it an ideal investment avenue for cryptocurrency market beginners. With our service, you can not only exchange among cryptocurrencies but also convert crypto to fiat. (Additionally, we have plans to introduce an off-ramp option, enabling users to withdraw funds directly to their bank accounts). To ensure overall account safety, we use robust security measures such as strong data encryption mechanisms and the Two-factor authentication (2FA) method.

As a great bonus to the OTC crypto exchange service, MaxSwap offers to gain even more flexibility in account management with its on-the-go exchange solution  – MaxSwap Telegram bot.

Selecting the appropriate wallet type is contingent on individual preferences, security needs, and the intended use of cryptocurrencies. However, strategically putting your funds into action and having prompt access to account management can be pivotal for the success of crypto investments. Opting for a diversified approach to cryptocurrency storage appears to be the optimal choice for traders of all types.