If you’re new to the Web3 space, you might have bumped into the expression, “Not your keys, not your coins.” This phrase has become popular – and crucially important. And you might be wondering about the best ways to store, send, and receive your NFTs or crypto like Ethereum, Avax, Bitcoin, etc.
This is where crypto wallets come in – they are your digital key to managing your digital assets securely. But here’s a twist: nowadays more than ever the risks of cyber theft and fraud are on the rise too. In 2020 alone, a staggering $1.9 billion was lost to crypto-related thefts and frauds, according to CipherTrace. This makes wallet security a top priority for anyone dabbling in cryptocurrencies. Let’s dive in!
Why Multiple Wallets?
Think of a crypto wallet as your personal safe. Would you keep all your valuables in one place? Probably not. The same logic applies to digital assets. Having multiple crypto wallets is like having several safes, each serving a different purpose and adding an extra layer of security.
Don’t Put All Your Eggs in One Basket
Using just one wallet, especially a hot wallet (like MetaMask for example), can be risky. Imagine a hacker sneaking malware onto your device and gaining access to your wallet – it’s like leaving your safe’s door wide open!
And then there’s the risk of connecting to compromised websites. You might think you’re safe on a legitimate site, but what if it gets hacked? Suddenly, a hacker could drain your wallet without you even being near your device.
Multiple Wallets, Multiple Layers of Security
By spreading your assets across various wallets, you significantly lower the risk of losing everything in one fell swoop. Remember the infamous 2014 Mt. Gox hack? It wiped out 744,000 Bitcoins because they were all stored in one vulnerable hot wallet. A diversified wallet strategy could have minimized the damage.
Here’s a simple approach: Use a hot wallet for everyday transactions, a hardware wallet for long-term storage, and maybe even a paper wallet for an added security layer. This way, you’re not just relying on one type of wallet, which reduces the risk of a single point of failure.
Setting Up and Managing Your Wallets
Creating and managing multiple wallets might sound intimidating, but it’s quite straightforward. Here’s a quick guide:
- Choose Your Wallet Type: Pick wallets that align with your investment strategy and security needs. Hot, cold, hardware, software, paper – each has its pros and cons.
- Create Your Wallets: Set them up as per the provider’s instructions. Store your recovery phrases and passwords securely – and no, not on your computer or phone!
- Name Your Wallets: Assign each wallet a unique name based on its purpose. This helps in keeping your investments organized.
- Secure Your Wallets: Strong passwords, two-factor authentication, and other security measures are your best friends. Store these details safely.
- Test Your Wallets: Send a small amount of cryptocurrency to each new wallet to ensure they work correctly.
- Manage Your Wallets: Use a portfolio tracker or a spreadsheet to keep an eye on your holdings. Stay alert for updates and security tips.
- Use Your Wallets Wisely: Steer clear of public Wi-Fi and unsecured devices when accessing your wallets. Stick to trusted exchanges and platforms.
Your Assets, Your Responsibility
In the end, managing multiple crypto wallets is all about taking control of your digital assets. Start with a hot wallet for regular use and a cold wallet for larger, less frequent transactions. As you grow more comfortable, you can expand your wallet portfolio. Remember, in the world of cryptocurrencies, being proactive about security is not just smart; it’s essential.