How to Store Bitcoins Safely – Guide
After a price spike in final 2017 and a subsequent decline in popularity, cryptocurrencies like Bitcoin saw another big rally in 2019 and 2020, beating previous records. As a result of this, the number of hacking instances disclosed has also grown. As many investors are new to the system and may not know how to keep your capital safe, hackers are inventing new ways to steal money. Some of the most visible thefts took place in plain sight: some hacks even publicly redirected tokens from one wallet to another. Victims watch helplessly as their tokens are taken from them without recourse. Bitcoins are kept in a wallet – a digital wallet – in the same way that cash or cards are kept in a physical wallet. A hardware-based digital wallet or a web-based digital wallet are possible. The wallet can also be stored in a mobile device, a computer desktop, or printed on paper to keep private keys and access addresses secure. But are any of these digital wallets safe? The solution to this issue depends on how the user handles their money. The owner of bitcoin cannot access the currency without a set of private keys, which are stored in all wallets. The most serious threat to bitcoin’s security is an individual user losing or having their private key stolen. The user will never see their bitcoins again unless they have the secret key. A user can lose their bitcoin for a variety of reasons, including computer problems (hard drive failure), hacking, or physical loss of the computer where the digital wallet is stored. We’ll look at some of the best ways to safely hold bitcoin in the sections below.
The best ways to keep bitcoin safely
Hot Wallet
Online wallets are also known as “hot” wallets. Hot wallets are wallets that run on devices connected to the Internet, such as computers, phones, or pills. This can create vulnerability because these wallets generate the private keys for their coins on these internet-connected devices. While a hot wallet can be very convenient in the way you can access and transact your assets quickly, it also lacks security. This might seem absurd, but people who are not using enough security when using these hot wallets can have their funds stolen. This is not an infrequent occurrence and can happen in a number of ways. For example, bragging on a public forum like Reddit about how much Bitcoin you hold while using little to no security and storing it in a hot wallet would be unwise. These wallets are meant to be used for small amounts of cryptocurrency. You can compare a hot wallet to a checking account. Conventional financial wisdom would say to keep only the money you spend in a checking account while most of your money is in savings accounts or other investment accounts. The same can be said for hot wallets. Hot wallets cover mobiledesktop, web and most exchange escrow wallets. It is important to note here that holding cryptocurrency in an exchange wallet is not the same as holding it in your personal wallet. Exchange wallets are escrow accounts provided by the exchange. The user of this type of wallet is not the holder of the cryptocurrency’s private key that is stored in this wallet. If an event occurs where the exchange is hacked or your account is compromised, your funds will be lost. Cryptocurrency exchanges do not provide SIPC or FDIC insurance, making secure cryptocurrency storage especially important. The phrase “not your keys, not your coins” is a very repeated concept on cryptocurrency forums. As mentioned earlier, it is not advisable to keep large amounts of cryptocurrency in any hot wallet, especially an exchange account. Instead, it is suggested that you withdraw most funds to your own “cold” personal wallet (explained below). Exchange accounts include Coinbase, Gemini, Binance and many others. Although these wallets are connected to the internet, creating a possible attack vector, they are still very useful for their ability to make transactions or trade cryptocurrencies quickly.
Cold Wallet
The next type of wallet and the safest option for storage are cold wallets. The simplest description of a cold wallet is a wallet that is not connected to the internet and therefore carries a much lower risk of being compromised. These wallets can also be called offline wallets or hardware wallets. These wallets store a user’s address and private key on something that is not connected to the internet and typically come with software that works in parallel so the user can view their portfolio without putting their private key at risk. Perhaps the safest way to store cryptocurrencies offline is through a paper wallet. A paper wallet is a cold wallet that you can generate on certain websites. It then produces public and private keys that you print on a piece of paper. The ability to access cryptocurrencies at these addresses is only possible if you have this piece of paper. Many people laminate these paper wallets and store them in safe deposit boxes at their banks or even a safe in their home. Paper wallets have no corresponding user interface other than a piece of paper and the blockchain itself. A hardware wallet is typically a USB drive device that securely stores a user’s private keys. This has serious advantages over hot wallets as it is not affected by viruses that might be on the computer because the private keys never come in contact with the network connected computer or potentially vulnerable software. These devices are also typically open source, allowing the community to determine their safety, rather than a company declaring it safe to use. Cold wallets are the safest way to store your Bitcoin or other cryptocurrencies. Most of the time, however, they require a little more knowledge to define. up. It is essential for anyone interested in owning cryptocurrency to learn about secure storage and the concepts of hot and cold wallets.
Physical Coins
Services are cutting up that allow Bitcoin investors to buy physical Bitcoins. The coin you buy will have a tamper evident sticker covering a predetermined amount of Bitcoin. To purchase physical currency, you may need to pay a small premium over the value of the Bitcoin you are purchasing, due to the cost of manufacturing and shipping the currency itself.
Other safety precautions
Backup
Backup your entire bitcoin wallet early and often. In case of computer failure, a history of regular backups may be the only way to recover the currency in the digital wallet. Be sure to back up all wallet.dat files, then store the backup in multiple safe locations (such as a USB, hard drive, and CDs). Not only that, set a strong password on the backup.
software updates
keep your software up Until the present date. A wallet running on non-updated bitcoin software can be an easy target for hackers. The latest version of the wallet software will have a better security system, thus increasing the security of your bitcoins. If your software is updated with the latest security patches and protocols, you can avoid a major crisis due to the enhanced security of the wallet. Consistently update your mobile devices or computer operating systems and software to make your bitcoins more secure.
multi-signature
The multi-signature concept has gained some popularity; involves approving a number of people (say 3 to 5) for a transaction to take place. Thus, this limits the threat of theft as a single controller or server cannot carry out the transactions (i.e. send bitcoins to an address or withdraw bitcoins). The people who can transact are decided at the beginning and when one of them wants to spend or send bitcoins, they require others in the group to approve the transaction.
Final note
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