Bitcoin, the cryptocurrency leader, is making waves again, prompting everyone to delve deeper into understanding this digital asset. One of the principal concerns for Bitcoin and crypto investors is deciding how to securely store their coins. Depending on your needs, you might require more than one type of cryptocurrency wallet. This comprehensive guide will dissect the various Bitcoin wallets, evaluate the security levels of each, and help you select the safest Bitcoin wallets for storage.
Understanding Bitcoin and The Basics of Blockchain Wallets
Bitcoin, the pioneer cryptocurrency, brought forth the innovation of blockchain technology. This technology enables users to be their own bank, meaning they have to manage and safeguard their assets. Although this requires some technical know-how, there have been significant strides in providing user-friendly interfaces to interact with a secure Bitcoin wallet on the blockchain via an app or desktop. Before deciding to buy and store Bitcoin, familiarize yourself with the various sections in this guide.
The Best Way to Store Bitcoin
The most secure method of storing cryptocurrency is usually an offline storage device referred to as cold storage. However, a cold storage device restricts easy access to your crypto assets. If you suddenly need access to your coins or there’s a significant market crash, it requires several steps and more time to access them.
Cryptocurrencies like Bitcoin and Ethereum are digital coins or virtual currencies that exist only via the internet on the blockchain. The advantage of digital coins is that they can be transferred quickly, moved easily, and tend to cost less while taking up no space.
Although cryptocurrencies are primarily digital coins, there are also some physical coins. These physical coins are metal “coins” that include a QR code or some other means to access a blockchain wallet.
Storing Coins On An Exchange
Storing coins on an exchange is often frowned upon due to the prevalent hacks in the crypto industry in 2018. However, the industry has since matured, and exchanges have implemented additional security measures to prevent such incidents. As long as the platform is reliable and has proper security procedures, storing coins on an exchange can be safe.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is an interface designed to allow access to the blockchain to easily move coins to and from the wallet. Each wallet has a private key and public key acting as the address. However, there are numerous types of wallet systems to choose from, ranging from the most basic to extremely advanced.
Types of Cryptocurrency Wallets
Here’s an exhaustive list of the various types of crypto wallets, their individual advantages and disadvantages, as well as explaining the different ways each wallet system works.
Hot wallets are defined as any type of wallet that has an ongoing “hot” connection to the internet. This live connection exposes the crypto assets to potential risk from hackers. Hot wallets are considered less safe than cold storage wallets.
Cold storage wallets are typically a USB or Bluetooth device that isn’t connected directly to the internet most of the time. Users instead access the wallet through a secure element within the device that prevents hackers from accessing funds of the private key of each wallet type. Cold storage devices are considered the safest place to store Bitcoin.
Paper wallets are an archaic Bitcoin storage method that is rarely used. It involves printing out or writing down a private key on paper for safekeeping and future access to the wallet. The problem with paper wallets is that over time users have lost the paper, it’s been destroyed in a fire, or ink has faded to the point where users cannot access their funds.
Offline wallets are the most secure cryptocurrency wallet type possible because there’s no direct connection to the internet. These devices are also called cold storage devices.
Hardware wallets are yet another way to define offline and cold storage wallets, because a piece of hardware is required to utilize the functionality.
Desktop wallets are one of the more deceiving wallet systems out there. They appear to be offline, however, they are really hot wallets connected to the internet in disguise.
Mobile wallets give the user the sense that the coins are stored on the mobile phone itself. However, this isn’t the case, the coins are stored on the blockchain.
Web wallets can be accessed by visiting a website or domain URL. This system connects directly to the internet to access the crypto assets, making them very risky overall.
How To Keep Cryptocurrency Safe?
Storing assets in a wallet is obviously how to keep cryptocurrency safe, but you can go above and beyond choosing the right wallet to further protect yourself from the risks associated with storing cryptocurrencies like Bitcoin and Ethereum. Personal operational security is a must. Hiding personal details to stay anonymous whenever possible is best for the safety of assets.
Risk Disclaimer Investing in or trading Bitcoin or other cryptocurrencies can be risky and lead to a complete loss of capital. This guide should not be considered investment advice, and investing in cryptocurrencies is done at your own risk. The information provided does not constitute a recommendation or solicitation to buy or sell cryptocurrencies or to engage in any particular investment strategy.