Crypto Security

Lesson 8

21 min

How can I keep my cryptocurrencies safe?

Blockchain technology is considered secure, but the responsibility for your cryptocurrencies lies with you. What really matters is your device and your online behaviour. We’ll show you how to store Bitcoins and other crypto coins and tokens securely – with simple measures like software updates, strong passwords and secure backups. That way, you’ll protect your wallet from theft, loss and unauthorised access.

Those wanting to store their crypto coins and tokens securely can weigh up hot and cold wallets and choose the wallet type that suits their needs.
Regular software updates, strong passwords and protecting your devices are crucial for your wallet’s security.
You should store your seed phrase offline, in multiple places and at separate locations so you can restore access to your cryptocurrencies in an emergency.
Avoid central points of failure by spreading your holdings and not storing everything in one wallet or on a single platform.

Where can I store crypto coins and tokens securely?

Anyone investing in cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH) should think early on about how to store these assets securely. Using your wallet correctly – whether online or offline – protects not only against theft but also against accidental loss due to technical errors or human failure.

Depending on how often you want to access your coins and how much security you need, different methods may be suitable: from a secure cold storage device to a mobile app for quick access. It’s important to understand how your keys are stored, how to recover them in an emergency and what risks are associated with each storage method.

Hardware wallet

A hardware wallet is a physical device that stores your private keys offline – i.e. separate from the internet. Well-known models like Ledger or Trezor are considered particularly secure, as they minimise exposure to online threats. These devices are ideal if you want to store larger amounts of BTC, ETH or other tokens and coins long term.

Advantages:

keys stay offline and are thus better protected from hacking
supports many different cryptocurrencies
secure even when connected to a compromised device (e.g. infected computer)

Limitations:

purchase cost
slightly less convenient for daily access or frequent trading
loss or damage of the device requires well-secured backups of the seed phrase

Paper wallet

A paper wallet is a physical copy of your private key or seed phrase – usually printed or handwritten, sometimes with QR codes. As there’s no internet connection, this method is one of the safest forms of offline storage. It’s particularly suitable if you want to store cryptocurrencies like Bitcoin for a long time without regular access.

However, a paper wallet also carries risks: paper can be easily damaged, lost or stolen. And there’s no digital protection like a PIN or two-factor authentication. If you opt for this method, you must pay special attention to physical security and use a trustworthy offline environment for its creation.

Brain wallet

With a brain wallet, you store or memorise your seed phrase or private key entirely in your mind – without writing it down or saving it digitally. While this method protects against physical theft or hardware loss, it comes with major risks: if you forget or misremember the phrase, your cryptocurrencies are permanently lost.

There’s also the danger of brute-force attacks with weak or easily guessed passphrases. A brain wallet only makes sense if you use a complex, unique combination of words and can remember them with absolute certainty. In practice, this method is unsuitable for most users.

Hot wallet

Hot wallets are digital wallets that are permanently connected to the internet. This includes desktop wallets, mobile wallets or web wallets on crypto exchanges. They’re especially suited to users who trade frequently or regularly access their coins and tokens – such as via the Bitpanda app or similar platforms.

The constant online connection increases the risk of hacking, phishing or malware. So it’s important to take additional security measures: use strong passwords, secure your device, enable two-factor authentication and always keep your wallet software updated. For larger amounts of Bitcoin, Ethereum or other tokens and coins, it may be advisable to store them offline. Hot wallets are often used only for smaller amounts or short-term access.

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Cold wallet

Cold wallets are wallets not connected to the internet. As such, they offer a particularly high level of security – ideal for long-term, secure storage of larger amounts of cryptocurrencies like Bitcoin or Ethereum. Typical forms include hardware wallets, paper wallets or specially prepared offline computers.

Since cold wallets don’t have direct access to the network, they’re effectively protected against online attacks. However, they are less flexible in use. If you trade regularly or want quick access to your tokens and coins, you shouldn’t rely solely on offline storage. Cold storage works best as a complement to a hot wallet – for users who deliberately manage their digital assets and want to minimise the risk of theft or loss.

Hidden wallet

A hidden wallet – also known as a “plausible deniability wallet” – is a concealed part within an existing wallet structure. This method is often supported by advanced wallet software, as seen with certain hardware wallets. The aim is to create an additional storage area that’s only accessible with an alternative passphrase and isn’t immediately visible.

Advantages:

offers extra protection against physical coercion or extortion
can serve as hidden storage for particularly sensitive coins and tokens
supports intentional separation of assets

Limitations:

technically more complex to set up
requires a high level of discipline in handling seed phrases and alternative passphrases
only useful if the device or wallet software supports hidden features

Protect Bitcoins & co.: how to secure your wallet

Storing cryptocurrencies securely is essential to avoid risks like theft or loss. One of the safest methods is using a hardware wallet such as a Ledger or Trezor device. These store your keys offline and protect them reliably from online threats – ideal for larger amounts.

If you access your cryptocurrencies regularly or actively trade, you can use software wallets or mobile wallets like the Bitpanda app. Make sure you update them regularly and activate security features such as two-factor authentication (2FA).

The general rule is: keep control of your private keys and secure your wallet with backups. For maximum security, it’s recommended to use a combination of hot wallet (online) for everyday use and cold wallet (offline) for long-term storage of coins like BTC or ETH.

The biggest security risks don’t come from blockchain itself, but from the devices and platforms you use daily – like smartphones, computers or crypto exchange websites. The places where you access your wallet, store your keys or manage your Bitcoins and other coins and tokens often pose the most common vulnerabilities.

It’s important to actively protect your wallet and cryptocurrencies. The following tips help you minimise typical risks and reliably secure access to your digital assets.

Safe use of public networks

Open Wi-Fi networks are convenient but risky. Anyone connecting without protection exposes sensitive data such as private keys or seed phrases to potential attacks – especially if wallets are stored directly on the device.

Avoid accessing your wallet over public networks whenever possible. If unavoidable, use a VPN and make sure your wallet is encrypted. Keep larger amounts offline and never store all your keys on a single device.

Key tips:

don’t access wallets via public email accounts
don’t leave devices unattended or lend them out
remove wallets before sending devices for repair

Keep software updated regularly

Outdated software is one of the most common security weaknesses when it comes to storing crypto securely. If you don’t keep your devices and wallets up to date, you expose yourself to avoidable risks. Updates fix known vulnerabilities, so they should be a fixed part of your routine.

Set regular times to update operating systems, wallet software and security apps. Avoid automatic updates for sensitive apps like crypto wallets. Wait a few days after release, read user reviews and check if everything runs smoothly. The same applies to firmware updates for hardware wallets.

Use an encrypted password manager

As an internet user, you’ve probably created dozens of accounts across various platforms – and maybe you use the same password for all of them. Beware: if someone hacks your password, they can access your emails, online shops, music streaming accounts and any other service you use.

There’s a simple solution: create a separate, secure password for every account. And don’t worry, you don’t need to remember them all: you can store them in an encrypted password manager like LastPass or Dashlane and just remember the master password.

Note, though, that password managers – especially cloud-based ones – can be targets for cyberattacks. An alternative is Keepass, a password manager that stores passwords locally on your device rather than in the cloud. This local storage provides an extra layer of security, as it separates your sensitive information from potential online threats.

Use two-factor authentication (2FA)

Enable two-factor authentication (2FA) wherever it’s supported. With 2FA, you can protect your accounts and assets against hacker attacks. This type of authentication is a cost-effective way to safeguard your Google account or other services you use to manage your cryptocurrencies. It’s also easy to install and use.

To activate 2FA, you’ll need to download an authentication app to your smartphone. From then on, each login will require not just your password but also a code sent to your phone via SMS. It’s best to download an authentication app now and activate 2FA. It’s a small step for you, but a big step for your security.

Trade cryptocurrencies on a secure platform

Before you start trading cryptocurrencies, compare platforms carefully. A secure and regulated platform protects not only your transactions but also helps you store your crypto securely – with integrated security features or transparent recovery options.

When choosing, look for the following criteria:

the platform is regulated and complies with applicable laws
there’s an experienced team behind it
modern security measures like two-factor authentication (2FA) are available
support for fiat currencies, cryptocurrencies and common payment methods like SEPA or PayPal
the platform is user-friendly and offers reliable support

Bitpanda is a European platform based in Vienna that gives both beginners and experienced users fast and secure access to digital assets. Besides cryptocurrencies like Bitcoin and Ethereum, you can also invest in stocks, ETFs and precious metals – all via a central, user-friendly interface.

For added security, Bitpanda uses features like two-factor authentication, SSL-encrypted data transmission, cold storage for the majority of crypto assets and session management with login confirmations via email.

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Recovery options

If you lose access to your wallet, you can use your seed phrase – also known as the recovery phrase – to regain access to your cryptocurrencies. This consists of a fixed sequence of words and should be stored securely, ideally offline and in several protected locations. Only those who know this phrase can access your coins and tokens. Keep it strictly confidential.

Make sure you understand exactly how recovery works for your wallet, as the steps vary depending on the provider. Read the instructions carefully and regularly test your recovery methods to ensure everything works properly. That way, you can react quickly in an emergency. If you store your seed phrase and private keys securely and have an emergency plan, you're much better protected.

Store cryptocurrencies even more securely

To store your crypto coins and tokens even more securely, you can use advanced security measures. Alongside the use of multi-signature wallets, which require multiple approvals for transactions, you should regularly back up your hardware wallets. These steps help ensure your digital assets remain safe even in the event of physical damage or loss.

Multi-signature wallets

Multi-signature wallets increase the security of your cryptocurrencies by requiring multiple approvals for transactions. Rather than one person being the sole owner of a wallet, multi-signature wallets require the consent of several parties to carry out transactions. These wallets are especially useful for businesses or groups wanting to manage their crypto assets jointly. By distributing control, multi-signature wallets minimise the risk of theft or loss, as hackers would have to compromise several keys to access the assets.

Hardware wallet backups

Backups of your hardware wallets are a fundamental security measure to ensure you retain access to your cryptocurrencies, even if the device is lost, damaged or stolen. A backup – usually in the form of a seed phrase – allows you to recover access to your cryptocurrencies. It's important that you store this seed phrase in a secure place, preferably separate from your hardware wallet, to protect against both physical and digital threats.

Physical security measures for wallets

In addition to digital security measures, you should also consider physical security for your wallets. This could include storing your hardware wallet in a safe or another secure location to protect it from theft or damage. For added security, you might consider using waterproof and fireproof containers to protect your devices and backup information from environmental damage.

Store cryptocurrency securely: store online or offline?

Deciding whether to store your cryptocurrencies such as Bitcoin online or offline depends on your security needs and how often you need access. Online storage, or hot storage, offers convenience and quick access but is more vulnerable to online threats. Offline storage, or cold storage, provides the highest level of protection against digital attacks, but makes accessing your assets less convenient.

From an IT security perspective, any single point of failure (SPOF) or attack vector is a problem. A SPOF is a component that, if it fails, disrupts the functionality of the entire system. This means you shouldn't just make one backup of your data but always maintain multiple backups (e.g. on different USB sticks), several wallets and several passwords.

Don’t use services that are constantly connected to the internet or your computer. Using a trading platform should be strictly limited to trading, and under no circumstances should you store your entire crypto holdings on it.

To trade cryptocurrencies on an exchange, you naturally need to keep a certain amount on the exchange and ensure liquidity. However, think carefully about how much you actually need for trading. It may be wise to avoid storing your entire crypto holdings in just one wallet.

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What can happen if you don't store your Bitcoins & co. securely

If you don't store cryptocurrencies securely, you risk losing your digital assets – whether through hacks, malware or fraudulent projects. To avoid typical scams and phishing attacks, be alert to emails and messages that seem too good to be true or prompt you to enter personal information. These examples show how important it is to store crypto coins and tokens securely and remain vigilant against potential threats.

Mt. Gox: the biggest loss in Bitcoin history

In 2014, the then-largest Bitcoin exchange Mt. Gox was hacked. Around 850,000 Bitcoin disappeared – a loss that’s still felt today. About 200,000 BTC were later recovered; the rest remained missing.

Slope Wallet: private keys compromised

In August 2022, over 9,000 wallets on the Solana blockchain were emptied. The cause was a security flaw in the Slope mobile wallet app, which unintentionally transmitted private keys to external services. The damage amounted to roughly 4.1 million US dollars.

Cryptojacking: secret mining on your device

In cryptojacking, attackers secretly use your computing power to mine cryptocurrencies. A well-known example is the Coinhive script, which was embedded on numerous websites in 2017 to mine Monero – often without the users’ knowledge.

ICO fraud: empty promises and exit scams

Many Initial Coin Offerings (ICOs) lure investors with unrealistic return promises and then disappear with the funds. A well-known example is BitConnect, which was exposed as a Ponzi scheme in 2018. To protect yourself, always check a project’s whitepaper, team and regulation before investing.

Conclusion: crypto wallets – where you can store your Bitcoins securely

Where you store your crypto coins and tokens plays a crucial role in their security. As you've seen, there are many steps you can take to protect your digital assets effectively – from choosing the right storage location to regular security checks and using additional security measures like multi-signature methods and two-factor authentication.

The responsibility for the security of your crypto coins and tokens lies in your hands. Safe handling of wallets, regularly updating software, using encrypted password managers and storing your private keys and seed phrases in a secure location help prevent unauthorised access and losses.

Following these guidelines can make the difference between securely storing your crypto coins or tokens and exposing them to the risk of unauthorised access. Don’t forget: the world of cryptocurrencies is constantly evolving. Stay informed about the latest security trends and technologies. With the right preparation and the necessary knowledge, you can ensure that your crypto wallets truly are the safest place for your Bitcoins & co.

Frequently asked questions about wallets and security

We answer the most frequently asked questions about security and crypto wallets to give you a complete overview.

How can I store my Bitcoins securely?

For maximum security, it can be worthwhile to use a hardware wallet – in other words, a cold wallet. This stores your private keys offline and protects them effectively against online attacks. If you access your coins and tokens more frequently, a hot wallet – such as a mobile or desktop version – can also make sense. Here, it’s especially important to use extra security measures like two-factor authentication and regular updates. Regardless of the wallet type, you should store your seed phrase securely and regularly check your backups.

What role do passphrases play in securing Bitcoin & co.?

A passphrase adds an extra layer of security to your seed phrase. It’s often referred to as the “25th word,” though it can consist of any characters or multiple words. Even if someone gains access to your seed phrase, the passphrase still protects access to your wallet. Not all wallets support this feature – but it’s often available with hardware wallets.

Important: If you lose the passphrase, you cannot recover the wallet – even if you still have the seed phrase.

Can a private key be recovered?

The private key itself cannot be recovered – but if you’ve securely stored your seed phrase, the private key can always be regenerated from it. That’s why it’s crucial to store your seed phrase offline and securely. If both are lost, access to your cryptocurrencies is permanently gone.

Store Bitcoin yourself or through a crypto exchange?

Storing Bitcoin yourself gives you more control and security, but requires that you handle the security measures yourself. Secure storage through a crypto exchange may be more convenient but carries risks, as you give control of your private keys to the exchange. Weigh the pros and cons and decide based on your security needs and comfort level.

What happens if I lose my wallet?

If you lose your wallet but have backups of your private keys or seed phrases, you can restore access to your cryptocurrencies. Without a backup, however, you lose access to your assets. So make sure to keep your backup information in a secure location.

How can I store the seed phrase securely?

Keep your seed phrase in a secure and private location, preferably offline – like in a safe or another protected place. Write it down on paper and avoid digital copies, which could be hacked. The seed phrase is the key to recovering your wallet, so it's crucial to store it safely.