If you are new to the world of cryptocurrency, you may not know a whole lot about safety and security when it comes to your increasingly valuable crypto collection. It’s time to think about this.
Upon first purchasing Bitcoin on Coinbase, you may have sat back, relaxed, and started watching the price climb. What a feeling! Watching your money work for you! So this is how big-shot capitalists feel! Every once in a while, you would come back to your account and see that, yes, once again, your Bitcoin is just a little more valuable! Cool!
And then it happened. You tried to sign into Coinbase, but it was offline. Coinbase had crashed due to heavy traffic. No worries, it’s just maintenance, right? No big deal right? I mean, your money is safe, right?
Yes, it turns out Coinbase was simply dealing with an issue and had to perform some maintenance (maybe some server upgrades?) to keep up with demands. They were back up and running in a couple hours. But that’s not the point.
The point is — Coinbase had your keys — and Coinbase was not available. So, your cryptocurrency was not available. In a sense, Coinbase owns your keys until you store them somewhere else.
Let’s imagine Coinbase crashes again when you want access to your funds. That’s no good. What if Coinbase gets hacked? It has happened to many other exchanges. What if Coinbase gets shut down – even temporarily – while the IRS does a little digging around? These are all real possibilities.
Knowing this, I purchased a Ledger Nano S from https://www.ledgerwallet.com/. With a hardware wallet, I have excellent security from theft and peace of mind that I am not leaving my funds in the care of an exchange or other third party.
The Ledger Nano S comes packaged with a micro USB cable that you connect to your computer. Once connected, and after entering your own personal PIN (up to 8 digits), you record a 24-word phrase that is your password to your funds. Keep this password phrase safe and secret. If your wallet ever fails or disappears, you can still access your funds with this recovery phrase. So can anyone else, by the way, if you leave this series of words lying around. Keep it safe.
Once you have recorded this information securely, have a look at the instructional paper that gives you an address to get started with your Ledger. Add the Ledger Manager and you can start installing any coin apps for coins you wish to send to the wallet (Update: you can now download the Ledger Live app directly from the official website at https://www.ledgerwallet.com/live to interact with your Ledger wallet. Make sure you always go to the official website!) . If your wallet runs out of room for apps, not to worry! Just uninstall one of the coin apps and install others — your keys will still be stored and you can access them by re-installing any of the coin apps you need.
When this is set up, go to whichever wallet you wish to use and adjust coin settings for transaction fees (I set mine to medium because I’m impatient — you could set your transaction fees to low, but expect to wait a little longer). Choose receive and scan the QR code on-screen by choosing “send” from your account. I would probably try sending a small amount the first time, even though it means paying a little more in fees — just to be safe.
Always double-check that the address on your sending device matches the receiving address. When you’re ready, send your funds. They should show up within moments, but may take some time to be confirmed.
Once you have completed sending your coins, detach the Ledger Nano S from your computer. Your funds are now in “cold storage” — as in, your keys are stored offline and are not available to hackers. This is a far, far safer place for your funds to sit than on Coinbase or other exchanges.
Now, store your wallet safely and store your 24 word phrase somewhere else safely, like in a fireproof safe. You might even want a couple copies of the 24 word phrase kept in separate, safe areas. This 24 word phrase is your only way to access your funds if the wallet ever fails, is lost, or is damaged. Keep it as safe as you would want to keep the pile of money it protects.
Now, you have peace of mind knowing your crypto funds are safe and secure!