With Cryptocurrency's massive rise in value over the past year, it has become a lucrative idea for startups, individuals, large corporations and billionaires alike. Unfortunately this value hasn't gone unnoticed, and it has also become a lucrative venture for thieves looking to steal millions by finding security holes in the various systems used to support Cryptocurrencies.

This is an ongoing issue, and is not going to disappear anytime soon. Google "Cryptocurrency Theft" and you'll find hundreds of examples in the past few months:

• Nov 2017 - Tether - More than $30 million worth of cryptocurrency stolen by hackers
• Dec 2017 - NiceHash - $64m in cryptocurrency stolen in 'sophisticated' hack

So what can you do to secure your Cryptocurrency?

Firstly, it should be noted that no currency - Crypto or not - is immune to theft. There are certainly things you can do to reduce your risk, but there is no foolproof method of securing your assets.

Software Wallets

Exodus Wallet

Software wallets are probably the most heavily used coin storage method for newbie investors. They're great for seeing balances and easily managing your currency without having to deal with too much tech, and overall they're pretty secure. If you're not actively buying and selling, or if you're dealing with a lot of money, there are probably better options.

There are some major risks to software wallets:

Firstly, the wallet owner often has no control over their coins. A wallet always has a private key that allows the owner to transfer funds out to other wallets. In many software wallets, the private key is not exposed to the user (for their own security, as some users might accidentally post their key online), but this means that if the online wallet site goes down, if the company fails and their app stops working, or if you lose access to your device or the installed wallet, you may be stuck without a way to retrieve your coins.

Secondly, depending on the wallet, your data may be stored on a remote server by the company that built the wallet software. As a software developer, I firmly believe that there is always a way to hack something, especially something as large as a Cryptocurrency wallet service. With the amount of money involved and how new the technology is, I can guarantee that there's countless hackers trying to find an exploit in online wallets 24 hours a day, 7 days a week. I suspect that all major wallets have a fairly sizable security team whose sole job is to identify and fix security flaws. Still, these flaws exist and it's always a risk.

Third, your own device may put you at risk. If you get a keylogger virus, or someone accesses your device (either in-person or remotely), they may be able to get into your account and transfer your coins. Some wallets now require 2-factor authentication, where a PIN is sent to your phone or email that must be confirmed before logging in. This extra layer of security can make it more difficult for hackers who may have comprimised your device.

Software Wallets Summary

• Free - Good for investors with small balances (<$1000 USD)
• Convenient
• Easiest to use
• Various security risks
• Good for buying coins using fiat prior to transferring to a different wallet

Hardware Wallets

Trezor Wallet

Hardware wallets are physical devices that plug into your device where you usually trade. Because the transactions are occurring on a separate device, it is often safer to make trades on a hardware wallet, as even if the device itself is compromised, the hardware wallet provides an additional layer of security that the hacker would need to bypass in order to get to your funds.

Most hardware wallets include a set of 'seed words' to recover your wallet contents in the event that your wallet is lost or damaged. Like a password, 'seed words' must be kept secret, and if you forget them and lose your wallet, you're probably out of luck for recovering your funds.

Popular hardware wallets range from $60 USD to $1000 USD+ and can be as simple as a USB stick with a button to confirm transactions, or as advanced as an IPad type interface with visual user interfaces. The most popular hardware wallets include the Trezor Hardware Wallet and Ledger Hardware Wallet.

Some users have reported thefts of Cryptocurrency from hardware wallets after purchasing used wallets from EBay or Amazon. It is recommended to only purchase a new hardware wallet and only directly from a reputable vendor (Trezor or Ledger) to avoid possible problems.

Whether or not a hardware wallet is worth it depends on the size of your investment.

Software Wallets Summary

• Costs money - Good for investors with larger balances
• More secure than using a device alone
• Never buy used as device may be compromised

Paper Wallets

MyEtherWallet
Do not ever reveal your wallet's private key to others.

Paper wallets are physically printed paper QA codes and/or PIN codes generated by software. There is a wallet address for coin storage, as well as a private key for coin transfers. Paper wallets, when managed correctly, are not susceptible to online theft - However the physical paper that the wallet is printed on could still be lost, destroyed, or stolen. They are ideal for long-term coin storage, or large balances where security is important.

A paper wallet may be generated for free on websites like MyEtherWallet or BitAddress.org. There are different types of wallets that must be used depending on the type of coin being stored.

Ideally the wallet generation code should be open-source (This typically means the wallet developer has nothing to hide in their code) and downloadable so you can run it offline.

The best practice for security is to download the wallet generation software and move it to a device that does not (and will not ever) access the internet, then print one or more copies of the wallet to an offline printer. I do not recommend generating a paper wallet on a device that is connected to the internet, as if you have spyware, viruses, or security that is otherwise compromised on your device then the paper wallet's private key could also become compromised.

Once the wallet has been generated, for maximum security it is best to use the paper wallet's private key only once on an internet-connected device, either cashing out/trading the full value of the wallet, or making some transactions and then moving the remaining balance to a new paper wallet where the private key has not yet been used on an internet connected device.

Paper Wallet Summary

• Highly secure against online attack when generated and used correctly
• Difficult for users who are not tech-savvy
• Potential for physical theft or physical loss (floods, fires, etc)
• Not great for frequent withdrawls - More work involved.
• Always generate your paper wallet on an offline device

Overall

• Use software wallets if you have a fairly small balance.
• Consider purchasing a hardware wallet for larger balances.
• If you understand how to use it safely, paper wallets are a very secure option for larger coin investments.

Thanks for reading!

-Matt