Cryptocurrencies take a leading role as a source of savings and understanding how to store them becomes a necessity. As the years go by, the use of cryptocurrencies is becoming more and more common. Angelo Babb, an expert in cryptocurrency, offers the best methods to store digital assets.
There are various reasons why cryptocurrencies are becoming more common. One of them is that there is a loss of confidence in the banks, since, on certain occasions, in times of crisis, they failed to give people the money they owed.
Another important factor is that the value of the currencies issued by central banks, such as the peso or the dollar, is often negatively affected by an issue without backing due to the needs of the context. On the other hand, many people no longer feel safe keeping dollars in their homes in the face of the possibility of being robbed.
Faced with these problems, cryptocurrencies present an excellent alternative. Among the advantages of saving on these assets, it can be highlighted that many have decentralized protocols. This means that the broadcast does not depend on a single entity, but rather on everyone who wishes to contribute to the maintenance of the network.
In addition, it is known in advance how the issuance process will be and what will be the maximum total amount of money in circulation. An important fact is that people have the possibility of storing and accessing their assets without the need for intermediaries.
One possibility offered by the market is exchanges. An exchange works like a foreign exchange house. One can enter money issued by a central bank, such as pesos or dollars, and exchange it for digital currencies.
You can also conduct transactions between cryptocurrencies. This option is ideal if you need to conduct transactions quickly or with low amounts. Fixed commissions can make it expensive to move money between places in the digital world.
Some platforms also offer the opportunity to earn interest on cryptocurrencies stored there. This allows you to make even more money by simply keeping your crypto assets in custody.
This option is ideal for new users in the crypto world whose knowledge of the ecosystem is still incipient, and in this case, it may be safer for the assets to be guarded by an entity and not by oneself, so the risk would be equivalent to when money is left in a bank.
Another alternative is to transfer the cryptocurrencies to a non-custodial wallet, that is, where one manages the custody. A non-custodial wallet is software that, through a seed phrase, allows you to store, send and receive cryptocurrencies.
Explains Babb, “The seed phrase, which is usually 12 words in English, is displayed when creating the address where the assets will be stored. It is of utmost importance not to lose it since, without it, you will not be able to access them.”
You can print out the seed phrase, or write it down on paper and keep multiple copies in different places to make sure you don’t lose it. There are also devices the size of a flash drive that store the seed phrase, and when linked to a computer, they generate the connection with the wallet.
The advantage of saving the assets in this way is that you have full ownership over them and the security is maximum as long as the seed phrase is not shared. Among the disadvantages, it can be mentioned that the costs when transacting between different cryptocurrencies are higher and also that in case of losing the seed phrase, there will be no entity to claim, so the capital will be lost without the possibility of recovering it.
If the investor’s objective is to bet long-term on a cryptocurrency project, and his idea is to prioritize security, the ideal would be to store the capital in a non-custodial wallet. While if the intention is to be able to operate easily and take advantage of short-term price variations, or earn interest on some cryptocurrency, then it will be convenient to store it in an exchange to save transaction costs and take advantage of interest payments.
Regarding the technical level, if the user does not fully understand the process for the use of a non-custodial wallet, it is not recommended that he manage the security of his cryptocurrencies, since it is possible that by making a mistake he could lose all of his assets. However, if the user has an advanced technical level, it is best to manage the custody and security of their assets with a non-custodial wallet when they deem it convenient.