Nowadays, we use cryptocurrency in many spheres of our lives and want to be sure of safe online gambling, digital shopping, investments, and many more.
Every now and then, there are stories on the Internet of how someone else in the early days of cryptocurrencies bought, mined, or received a gift of it, and after a sharp increase in the course, could not access the assets. If you don’t want to be discovered in their place, then here is a short guide on how to store your cryptocurrency safely.
Hot or Cold?
First, let’s define a couple of terms. For storing cryptocurrencies are used hot or cold wallets. Roughly speaking, the watershed runs along with the Internet connection: if the wallet is on some service or networked device, then it is hot. Those that do not have access to the Internet are called cold ones.
The difference between several storage methods is primarily security and usage. For example, hackers cannot gain access to a cold wallet – they can only be stolen physically. Their disadvantages include the speed of payment: it takes time to conduct a transaction. On the other hand, hot wallets can process transactions fast but might be stolen.
Hot Storage of Crypto
Such wallets are most popular with novice users and people who trade a lot. Web wallets are usually offered on the websites of major cryptocurrency exchanges. They can store any purchased currency, help you quickly sell it, or transfer it to other users. The popularity of this type of wallet is due to the ability to quickly and easily sell various coins and make transfers directly on the site, which is very convenient for novice users.
Web wallets are also great because they can be accessed through a browser from anywhere in the world. This allows you to always manage funds if you need to pay for something or make a transfer. The main problem of such wallets is the presence of potential risks of hacker attacks, so storing large amounts of money in them is very dangerous.
Despite the fact that the relevant sites do their best to ensure the security of the offered wallets, they cannot control other people’s computers and find viruses and spyware on them, with the help of which hackers steal money from accounts.
Mobile wallets are usually used for storing small amounts, as well as for very impressive ones. More and more stores around the world are starting to accept payments in Bitcoin or Ethereum, so it is convenient to keep some of these tokens in a mobile wallet in case the user needs to pay for something.
This type of storage is often used for financial companies and large investors who decide to invest in digital assets. In fact, this is a hot wallet that stores a service with high responsibility to customers.
The custodians themselves own the private key. This means that you do not have full control over the funds in the wallet. Therefore, if you decide to consider such methods, it is very important to check the service.
Cold Storage of Crypto
Of course, you can keep large amounts of cryptocurrencies with the help of custodians. But the best option for safely storing bitcoins is a cold wallet.
If you’ve been looking into where to store bitcoin in bulk, you’ve probably seen hardware wallets. These are small devices resembling flash drives that can be connected to a computer to transfer cryptocurrencies.
Hardware wallets are designed to simplify the process of long-term storage. With a compact design, you can take the device with you or hide it in a safe place, and after connecting to a computer, you have almost immediate access to funds.
Hardware wallets work like this: at the first start, they offer to come up with a pin code that will need to confirm any actions. After that, you will be given a seed phrase – a code of 24 random words, with which you can restore access to money if you forget your password. After that, you can use the device.
Paper and Cards
The most reliable option for storing money in bitcoins is a paper wallet. Devices can break down, and computers stop working. Paper, on the other hand, has no shelf life, except for flood, fire, and long exposure to sunlight, but this applies to any physical wallet.
A paper wallet is a regular sheet that prints data for sending and receiving funds, as well as a seed phrase for restoring access. It can be stored, for example, in a safe and taken out every time you want to transfer funds. The main thing is not to photograph it with a smartphone because this way, your data can appear on the Internet.
The hot wallet can be compared to an ordinary wallet or a bank account – it is worth keeping those assets that you intentionally transfer there (for example, to play on the stock exchange).
A cold wallet can be compared to a safe or a safe deposit box – you can send those cryptocurrencies that you want to save.
But remember that non of them gives a 100% guarantee of the safety of funds. Therefore, you should not store all your savings in cryptocurrencies in only one wallet – it would be much better to distribute them between hot and cold.