Thread by @KadenaDirEng

1/ Let's look at the second item of the three major components of cryptocurrency security:

2. How you store your private key

https://twitter.com/KadenaDirEng/status/1400397429107838981

2/ Now that you've generated your keys securely (as we discussed in

https://twitter.com/KadenaDirEng/status/1400807217960529923

), you need to store them safely. The most secure way to store private keys is on a device that is not connected to the internet. This is what we call "cold storage".

3/ Cold storage of your private keys gives you better security because people have to have physical access to the key to attack you. This rules out billions of people from attacking you over the internet by hacking into your computer.

4/ Cold storage can be a number of different things: an always-offline laptop, an encrypted USB drive, or even a piece of paper.

5/ Security is always a tradeoff. The tradeoff here is that private keys stored in cold storage are not as convenient to use. The alternative is to store your keys in hot storage...i.e. a computer that is connected to the internet.

6/ With hot storage you should think about how easy it would be for a hacker or virus to get your keys. Wallet software that encrypts your keys and requires a password to decrypt them will be more secure than wallets that store your keys unencrypted.

7/ If your keys are encrypted, the attacker can't just copy your keys. They would also have to obtain your password somehow...perhaps by installing a key logger on your computer or perhaps with some other kind of attack.

8/ Hardware wallets are kind of a middle ground between cold and hot wallets. They are specially designed devices that can store keys but are designed to make it impossible to actually get the private keys off the device.

9/ Instead of copying the key off the device, you send your transaction into the device and the device signs the transaction with the private key embedded into it and gives you back the signature.

10/ Hardware wallet devices are the current best practice for securing cryptocurrency. Some are dedicated to crypto like Ledger / Trezor / etc. But in some cases you also may be able to use other 2-factor devices like Yubikeys or Apple TouchID / FaceID to hold your keys.

11/ Dedicated crypto hardware wallets have been in use for awhile, but look for other 2nd-factor devices to become more widely supported in the future.