Trying to get educated...why should I not keep my crypto in Robinhood and what does a hardware wallet do? Can someone shed some light on this topic?
Why pay robinhood 0.7% to do basic trading when you can own the keys and do it on decentralized exchange
How?
There’s now a difference between a wallet and a vault. The idea of the hardware is so that your keys do not leave the physical device. You’ll write it down and store it in a safe, punch it in metals and fireproof storage. Then vault vs wallet. Move the majority of long term assets to a vault, such as BC vault who claims the chemical makeup of their chip can last 200 years, however they’re able to make that claim, whatever. Then another hard wallet for everyday operation. Trezor and ledger seems to be good here, especially ledger who has good integrations with a wide range of software wallets. This means that the hardware signs the transaction and the software executes it, the private keys never leaves the hardware here again. Firmware is another area to look at. Trezor is OSS, ledger is private. If you get a ledger for every day wallet, it can work with mobile wallets, but Trezor is desktop only. Maybe an order of priority and its comparison is: 1. Vault - BC vault (long term investments) 2. Hard wallet - Trezor/Ledger/Ellipal (bank account) 3. Soft wallet - exodus/neon/metamask (pocket cash) All of these you control your private keys. I don’t want my keys controlled by a third party such as an exchange. Most of the wallets now support swaps and exchanges too, so I’m not sure I’m seeing the point of an exchange anymore unless you’re a trader.
Hardware wallets keep your private key away from anything directly connected to the internet. Makes it a lot harder for someone to hack your private key than if it was say lying around on your computer. Once someone takes your coins there is NO way to get it back. Keeping your own wallet also means you truly own your crypto. Robinhood might lend it out, and could theoretically screw that up like FTX did. If you have it in your own wallet, it's impossible for that to happen. Hardware wallets do have risks: (a) the $5 wrench attack -- don't advertise that you have one, how much you have in it, and definitely don't pay for stuff directly with your main crypto wallet because whoever you pay to can see how much you have left in your wallet (b) natural disasters -- you need to keep your private key phrase backed up (written down) in case of a fire or other disaster to your home, otherwise you lose a chunk of your net worth if you can't find the keys for it. You can't back up the key online or on a computer, it becomes a target and no better than a software wallet. Some people choose to hammer the key phrase into a physical piece of steel and put it in an obscure location in their home. Others just keep a written copy at home and another written copy in a bank vault or some such. Whatever you do, do not EVER input it into an electronic device. If you do you might as well use a software wallet like MetaMask. Keep in mind that security of crypto wallets needs to be taken very, very seriously. More seriously than you think. If you have $500K worth of BTC in a wallet and a criminal knew that, they'd happily spend $400K in {compute, property attacks, violence} to get it. Crypto in Robinhood has its advantages as well. Notably, crypto in a Roth IRA means you never owe taxes on its growth, and you aren't subject to long/short term and wash sale schengens, you can just buy and sell whenever and never owe any taxes.
Awesome, thanks for the super detailed explanation!
Wow super helpful. How can I put crypto in Roth IRA?