Keep your cryptocurrencies safe and secure! (Photo credit: André François McKenzie)
The rise of Bitcoin and other crypto has created more reasons for owners to understand proper security of these currencies. Users can lose money due to hardware failure, loss of keys, and theft. Here are some of the best ways to store cryptocurrencies such as Bitcoin:
Hot Wallet
A “hot wallet” is internet-connected, making it more convenient but also more vulnerable. (Photo credit: Dmitry Demidko)
A “hot wallet” is the easiest way to store cryptocurrencies. Similar to a checking account, a hot wallet is a fast way to access and transfer funds. One important consideration is that hot wallets, also know as exchange wallets, are not insured by the FDIC or any other entity. In other words, if that organization was to be hacked and your coins were stolen, there would be nothing to bail you out. While a hot wallet is useful for making exchanges, it should not be used for holding large amounts of cryptocurrencies. Instead, those larger amounts should be transferred to the next option:
Cold Wallet
A “cold wallet” is safer because it is stored offline. (Photo credit: Erin McKenna)
A “cold wallet” is the safest way to store Bitcoin and other digital currencies. Also known as hardware wallets, these wallets are stored offline and are therefore less susceptible to hacking. One of the safest ways to store an offline wallet is by printing it off and making a “paper wallet.” This includes a public and private key that can be used to verify your identity and access the coins. Another way to store a wallet offline is by using a USB drive to hold the public and private keys. The risk in this situation would be the loss or damage to these physical devices/paper.
Physical Coins
Physical coins are another popular way to store Bitcoin. (Photo credit: Dmitry Demidko)
There are premium services available that will create and ship physical coins to you, with a tamper-proof sticker that indicate the value of the coin. This is more expensive that the free methods mentioned above, but it represents a unique way to hold a digital currency.
Other Considerations
Here are some other things to consider when storing digital currencies:
Keep your wallet backed up to protect yourself from hardware failures. Store the backup separately from the computer with a good password.
Keep your Bitcoin/crypto software updated to keep it secure.
Consider using multiple signatures for transactions to increase security from theft.
Read as much as you can about the topic. Search for articles and learn about the currency you are investing in and how to keep it safe!
Thanks for reading!