Cryptocurrencies have experienced a surging popularity in recent years. Since the advent of the first cryptocurrency, Bitcoin (BTC), in 2009, numerous digital currencies have emerged. While some have had short-lived success before ultimately crashing, others have maintained their market presence over an extended period.
Several methods exist for storing cryptocurrencies, none of which can be guaranteed as entirely 100% secure. However, there are numerous approaches you can take to store your Bitcoin and other cryptocurrencies securely.
The storage of Bitcoin
Bitcoin was the first cryptocurrency in the market and presently holds the top position in terms of value. You can track the price of Bitcoin on various apps or sites.
When making a cryptocurrency transaction, such as purchasing Bitcoin, through a crypto exchange, a pair of keys are provided. You are given a public key and a private key. The public key is used for encryption and creation of your wallet address, whereas the private key is used to decrypt information. The private key is the one you are given to keep safe.
There are two primary categories of cryptocurrency storage solutions: custodial and non-custodial wallets. Both of these categories offer hot and cold wallet options, which vary in terms of accessibility and security. By selecting the appropriate wallet type and configuration, you can effectively manage and safeguard your cryptocurrency assets.
Your ownership of Bitcoin is safely recorded on the blockchain, and it cannot be hacked. However, depending on the type of crypto wallet you use to store the private key it may be vulnerable to hack or breach.
Custodial wallet
Definition
The service provider, or the custodian, holds the private keys to the user’s crypto assets and is responsible for managing them on their behalf. This means that all transactions must be approved by the custodian, who also has full control over the user’s funds. In return for providing this service, custodians typically charge a fee.
Custodial wallets also allow users to store multiple cryptocurrencies in one place, making it easier and more convenient for them to manage their portfolios. Moreover, custodial wallets are often slightly more secure than hot wallets since the private keys are stored on secure servers.
Custodial wallets are often used by institutional investors who want to keep their investments safe from hackers and other malicious actors. They can also be used by individuals who don’t have the technical expertise to securely manage their own cryptocurrency holdings.
Non-Custodial wallets
Definition
Unlike traditional wallets, which are typically managed and operated by financial institutions such as banks, a non-custodial wallet gives users full control over their funds and private keys. This means that the user is solely responsible for their own security and can make transactions without relying on an external entity.
Non-custodial wallets provide greater security since stored funds are not at risk of being stolen or hacked from centralized servers. Furthermore, users can easily back up their data through seed phrases which allow them to recover their funds if needed.Â
Some of the most popular non-custodial wallets include:Â
Cold Wallets
Definition
Cold wallets come in two forms – hardware and paper wallets. Hardware wallets are small devices that look like USB drives or credit cards, while paper wallets are printed documents with private keys written on them.
Both types of cold wallets provide the same level of security; however, hardware wallets may offer additional features such as password protection and two-factor authentication. Additionally, they can also be used to make transactions directly from the device itself without having to connect it to a computer or mobile phone. In any case, cold wallet storage is one of the safest ways to keep your cryptocurrency secure.
Hot wallets
Definition
However, many hot wallet providers have implemented security measures such as two-factor authentication and multi-signature technology in order to protect user funds. Hot wallets also offer a range of features that may be beneficial for certain types of users, such as the ability to quickly send and receive payments or set up recurring payments.
How to choose the right Bitcoin storage method for you
There are a number of things that you should consider when choosing a Bitcoin storage method.
- The security of the method: You should make sure that your chosen storage method is secure and reliable. There are various methods available for storing Bitcoins, from software wallets to hardware wallets to paper wallets. Each has its own benefits and drawbacks, so it’s important to research each option thoroughly before making a decision. Additionally, you should also look into any additional security measures that may be offered by the wallet provider. This could include two-factor authentication or multi-signature authentication, which can help protect your funds even further.
- The convenience of using the method: Some methods may require more time and effort on your part in order to set up and use them properly than others do. For example, if you opt for a hardware wallet such as a Trezor or Ledger Nano S, you will need to go through an extensive setup process in order to get started with it. On the other hand, software wallets tend to be much easier and quicker to set up and use on a daily basis.
- You should determine how much bitcoin you want to store: If you are only storing a small amount of Bitcoin, then a hot wallet or mobile wallet would be sufficient. However, if you are planning on storing larger amounts of Bitcoin, then an offline hardware wallet is likely the best option for security reasons.
- Consider your expertise in using digital wallets and other forms of cryptocurrency storage: If you’re new to cryptocurrencies and don’t have much experience with digital wallets or other forms of cryptocurrency storage, then a custodial service may be the best option for you as they will handle all the technical aspects of secure storage. Alternatively, if you have some technical knowledge and experience with digital wallets and other forms of cryptocurrency storage, then it might make more sense to use one of these methods yourself.
- The cost associated with each type of wallet: Generally speaking, hardware wallets tend to be more expensive than software or cloud-based wallets due to their enhanced security features. Moreover, custodial services may charge fees for storing your coins securely on their servers so it’s important to factor this into your decision when choosing which type of wallet is right for you.
- Consider how easy it is to access your funds: Some methods may require more steps than others which could make them more inconvenient for regular use. Additionally, you should also check for any fees associated with transactions or withdrawals when using a particular storage method as these can add up over time and reduce your profits.
Ways to keep your Bitcoin wallet safe
Bitcoin wallets are a great way to securely store and manage your digital currency. However, it is important to remember that just like any other form of money or asset, these wallets should be kept safe from malicious intent or theft. Here are some tips for keeping your Bitcoin wallet secure:
1. Use two-factor authentication (2FA) whenever possible: 2FA adds an extra layer of security to your wallet by requiring a code in addition to your password before allowing access. This can greatly reduce the chances of someone else accessing your wallet without permission.
2. Create strong passwords and change them regularly: Strong passwords should consist of at least 10 characters that include upper and lowercase letters, numbers, and symbols, if possible. Additionally, it’s important to change your passwords on a regular basis in order to further protect against potential hackers or intruders.
3. Store private keys offline when possible: Private keys are the codes used to access various cryptocurrency wallets; they should always be stored securely away from the internet in order to prevent potential theft or hacking attempts from occurring online.
4. Be aware of phishing attempts and scams related to Bitcoin wallets: Phishing attempts often use fake websites or emails designed to look legitimate in order to gain access to individuals’ private information or accounts; always double-check URLs before entering any personal information online, and be sure not to click on suspicious links sent via email or social media messages.
5. Use a hardware wallet when possible. Hardware wallets are physical devices used to store cryptocurrency and private keys offline securely; these are a way to ensure your digital assets remain safe and secure from malicious intent or theft.
