If you’re investing in cryptocurrencies for long-term profit, you’ll want to keep them safely tucked away. Crypto is a volatile market where fraud is also common. To prevent a bankrupt crypto company from taking you and your investments with them, there are a number of ways to make your ‘investments’ pay off in a safe manner.
This article in brief
- While savings are protected up to an amount of 100,000 euros, crypto assets are not.
- With an offline wallet, such as a ledger, you protect your cryptocurrency from cybercrime and crypto company bankruptcy.
- If a hardware wallet breaks or gets lost, you can regain access to your assets with a seed set.
While your savings are protected up to a hundred thousand euros by De Nederlandsche Bank, this is not the case with cryptocurrencies if a bank goes bankrupt. If you leave your crypto assets in a digital wallet managed by a crypto exchange such as Bitvavo, Binance or KuCoin, you will lose your money when they go bankrupt. Lost really means lost, unless maybe your broker can find $5 billion in a closet somewhere.
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Therefore, it is useful to keep track of your crypto yourself if you do not want to worry about it for a long time. This is possible with a ‘cold wallet’, a crypto wallet that you own offline. Because your wallet is not connected to the internet via a PC, laptop or mobile, it is therefore protected against technical problems such as a computer crash. Additionally, hackers cannot take your belongings away.
An example of a ‘cold wallet’ is a ledgerof the company of the same name. With a ledger as a wallet, you physically manage your crypto assets. If the company fails, you are still the owner of your crypto coins. You must protect such a ‘cold wallet’ well, because it contains your ‘private keys’. “These are the keys to your crypto,” emphasizes Herbert Blankesteijn, host of CryptoCast. ‘You usually protect your ledger with a four- to eight-digit PIN code that you have devised yourself, which you enter when you connect the ledger to a computer. In addition, the app you use is protected with a password.’
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In addition, you also have a ‘seed phrase’ which gives you extra protection for access to your wallet and your private keys. In fact, the seed sentence is a snake of random words. If you lose your hardware wallet or if it breaks, you can use your ‘seed phrase’ to retrieve your private keys and therefore cryto-assets. It is important to get the words in order because without the correct order you will no longer have access to your assets. Write down your word snake somewhere and keep that note somewhere safe where others can’t or can’t reach it.
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But in addition to the cold wallet, such as a ledger, you have another safe way to store your crypto assets: a paper wallet. To do this there are a number of steps to take. For example, you first need to create a ‘public key’ and a ‘private key’, which is possible through various websites. You then save that information on a piece of paper, which you then store properly. The risk with a paper wallet is that paper and ink can perish, so there’s a chance you’ll still lose access to your crypto assets. ‘Instead of the actual keys, you can only save the seed. There is less chance of error’, says Blankesteijn.
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