Quick Version
Most big exchanges are relatively secure, so you are probably okay for a while. You still don’t ACTUALLY control your keys (or crypto) when storing on exchange. (you’ll need to trust the exchange to finalize the transactions and keep storage secure)
Using a hardware wallet like Ledger Nano, Trezor, etc. puts you in control of your assets completely.
Safely store the recovery (seed) words provided to you when you create a wallet on the device. Keep these words in a locking safe, your memory, an air-gapped OFFLINE computer, a password protected file or a choice location of your own. **With those words, anyone can access your assets, so choose wisely.
Send your Bitcoin from your exchange account to your hardware wallet address; each blockchain has a different address format, so be sure you are sending to and from like addresses.
Sending ETH to a BTC address likely won’t work, which is good for newcomers, but if it did, it would destroy those assets. Below is a Bitcoin address, notice that it starts with the number 3. This is common for many BTC addresses.
Notice the beginning of the below address is 0x0, this is common for Ethereum addresses. (You may also notice that tokens built on Ethereum are stored on the same wallet addresses as ETH, these tokens are called ERC20’s)
Always be sure to double or triple check the address, and what asset you are trying to send, and that it matches what you copy/paste before you submit the transaction. I always look at the first and last 5 or so characters to be sure they match when copy/pasting. **Avoid hand-typing addresses.
In-depth Explanation
Keys & Seeds
Private Keys and Public Keys work together to allow you to send and receive cryptocurrency. Public keys include a QR code, and a string of characters that one would need in order to send a payment. They can also be used to track transactions and snoop around in your wallet, so be aware.
A private key should always be kept private. It is a string of characters which unlocks a users wallets. Private keys are the “keys to the kingdom” so to speak. Whoever has the private key controls the assets. If you lose or forget your private keys, those Bitcoin will stay in place forever. Without holding the private key, there is no way to gain access to them.
Whenever you create a new wallet, instead of needing to remember or safely store a long string of hexadecimal characters, simply remember a given number of words, usually between 12 and 24 of them. **How to keep the seed words secure will appear in a different guide.
Ledger Nano, as well as other hardware wallets will provide this string of words when created. The wallet will prompt you to reenter them to ensure you’ve recorded them. Because these devices are so simple, they have no way of storing your words to memory, or transmitting them, this is why we humans must do the part of keeping them secure.
This string of words given to us are called “Seed Words” or simply “Seeds”. The hardware device itself is just a vessel, and the words themselves store your private key, and your assets. Should you misplace or lose this device, all you would need is a new one, and the 24 seed words in order to gain access to your wallet.
Your ledger will only be able to tell you these words when it initializes your wallet one time, never again thereafter, so storage of the words is of utmost importance.
Hardware wallets do a very simple but important job. Because of the nature of computer hacking exploits, and ways that individuals can remotely manipulate computers, hardware wallets are purposefully made to be quite simple and lacking of features.
Which Wallet?
Ledger Nano S hardware wallets are the recommendation. These wallets are a great way to secure your digital assets off-exchange and ensure that no one has access to your private keys.
While there are certainly other free ways like apps and software to secure your assets, they have frightening limitations and exploits. The small investment of less than $100 for total control seems a wise expenditure.
There are times to use software wallets, but they should be backed up to encrypted hard drives using secure computers, offline whenever possible. **All guides post to the archives.
For getting started, it is easier, and safer to use a hardware wallet to store the private keys, and for the user to store the 24 words in a safe or in memory as a backup in the case of losing the hardware device itself.
Consider picking up a Ledger Nano S, Nano X, or Trezor! You also help support this free content.
Setting Up Your Wallet
Once you’ve received your hardware wallet, you should begin to familiarize yourself with it and its operations. These companies put out great products and have guides of their own to assist you in learning their device.
You can either initialize a new set of seed words, or start with seed words you’ve already had. The process here is straight forward but requires a computer and probably the internet.
Once you’ve gotten the wallet initialized, you will need apps depending upon which currencies you are working with. Bitcoin will likely be loaded first. You can use an app like Ledger Live to interact with the wallet and set up an address.
Once you have added the BTC app, and created a new wallet, you will see a 0 balance, as well as a button for sending, and receiving. Find your wallet address.
You will need to interact with your hardware wallet any time you are accessing certain functions. Because it holds the private key which is required to access your blockchain real estate, you will be asked to verify, and confirm transactions.
We physically interact with the hardware wallet to remove the potential for remote access, which would give hackers free reign to emptying your wallet with a few keystrokes.
Now that you have copied the cold-storage address from the hardware wallet, you can open your exchange app or website where your Bitcoin is. Always send a small test transaction to the copied/pasted address.
Always remember the first few and last few characters of the receiving address and match them when pasting. Using the QR code can be easier, but be sure to double check the address is correct every time, before you confirm.
You will likely need to jump through a few hoops like entering 2FA password, or clicking a link in an email to verify it is you sending from your exchange account.
When you are sending from your new hardware wallet, you will need to verify this transaction on the device itself.
Because this hardware wallet device requires a physical input from the user, no hacker can access your computer and steal your stuff, at least not if you use a secure hardware wallet.
Are there questions you have? Guides you’d like to see? Something else you’ like us to know? Leave a comment below!
This is exactly what I was needing, thanks.