While buying and selling Bitcoin is accessible to everyone, not many people realize that crypto trading requires responsibility, as you have to protect your funds – otherwise, they could be gone forever. Cryptocurrencies offer many opportunities, and since they involve huge amounts of money, they appeal to bad actors who can target your wallet and steal your tokens. This is why it is crucial to store your Bitcoin safely by choosing the suitable method. Bitcoin is the first cryptocurrency launched, and it still remains a pioneer in the industry even today, with its price estimated to hit $250,000 by the end of 2030. If you’ve recently got into digital assets, you may wonder where to buy bitcoin. Well, crypto exchanges are the best way to do so straightforwardly, as all you have to do is create an account and follow the instructions on the platform.
When buying Bitcoin via an exchange, you are provided with a pair of keys, namely a public one used for encryption and generating your wallet address and a private one used for information decryption. The latter is designed to help you keep your BTC safe. Two types of crypto storage solutions are available: non-custodial and custodial wallets, which provide hot and cold wallet solutions. These two options differ in terms of security and accessibility, and it’s crucial to choose the appropriate wallet type to safeguard your crypto funds. Let’s discuss each of them in detail below.
Image source: https://www.pexels.com/photo/gold-round-coins-on-gold-glittery-surface-5980573/
While a traditional wallet is managed by a bank, a non-custodial wallet gives this responsibility to users, allowing them to control their private keys and funds fully. This type of wallet translates into greater security because it makes it less likely for your stored funds to be stolen. Plus, it enables you to back up your data via a seed phrase (a series of random words which help you recover your funds if necessary).
Unlike non-custodial wallets, custodial wallets are managed by a custodian or service provider who holds your private keys. This means they have complete control over your funds, so for a transaction to be completed, the custodian must first approve it. With a custodial wallet, managing your investment portfolio is simple because you can store several cryptocurrencies in one place. If you lack the technical expertise to manage your crypto holdings safely, custodial wallets may be the right option. However, you should remember that you’ll have to pay a fee for this type of service.
A hot wallet is connected to the Internet, allowing you to access your digital assets whenever and wherever you want. While this can be convenient, it also poses risks, making you more susceptible to cyberattacks. The good news is that hot wallet providers have adopted security measures like multi-signature technology and 2FA to help users protect their funds. Moreover, hot wallets provide different features that may benefit some users, like sending and receiving payments quickly.
A cold wallet lets you store your crypto offline, making it ideal for long-term storage. Since you don’t have to be connected to the Internet to access your funds, this type of wallet offers increased security, making it challenging for malicious actors to target it. There are two types of cold wallets: hardware wallets and paper wallets. While they are both secure, the former provides additional features like two-factor authentication and password protection. Cold wallet storage is the recommended method for keeping your BTC safe.
Aspects to keep in mind when picking a BTC storage method
Deciding how to store your Bitcoin can indeed feel overwhelming, but there are some aspects that can help you make the right decision. When choosing a storage option, you should consider the following:
- Convenience. Some storage options are easier to set up than others, so pick a wallet that doesn’t require much effort and time. For example, a software wallet can be set up and used easily and quickly.
- Security. This is one of the most important things to look out for when picking a BTC storage option. As mentioned earlier, different types of wallets are available, including software wallets and hardware wallets, and each have their pros and cons. So, it’s crucial to weigh your options carefully and pick the one which offers the greatest security. Some wallet providers offer extra features which help boost the security of your funds, so it’s worth looking into them.
- The amount of BTC you want to store. You’ll need a different type of wallet depending on how much Bitcoin you plan to store; while a hot wallet is enough for a small amount, an offline hardware wallet is a better option if you want to store significant amounts of BTC.
- Your technical expertise. Suppose you’ve just started your crypto trading journey; in that case, it’s best to opt for a custodial service, which will help youdeal with the technical aspects related to Bitcoin storage. Your experience with digital wallets is critical to consider when opting for a storage method, so don’t overlook it.
- Cost. In general, hardware wallets cost more than software wallets because they provide increased security features. Additionally,custodial services typically charge fees for managing your funds, so keep this in mind when deciding which type of wallet is more suitable for you.
Tips to increase the security of your Bitcoin wallet
Like any form of money, cryptocurrencies are susceptible to malicious activities. Therefore, it’s essential to implement robust security measures to ensure your Bitcoin wallet doesn’t fall into the wrong hands. Here are some things you can do:
- Use 2FA. Two-factor authentication, or 2FA, creates an additional layer of security for your Bitcoin wallet, as you must enter a code before accessing your funds. This helps prevent unwanted access to your wallet.
- Create robust passwords and change them frequently. A solid password is made of at least ten characters and includes numbers, symbols, and upper and lowercase letters. Besides ensuring your passwords are strong enough, you should also change them regularly to boost protection against potential cyber criminals.
- Beware of scams and phishing attempts. It can be challenging to recognise a phishing attempt immediately, but bad actors use fake websites and emails to access your accounts and private data.However,there are ways to avoid falling victim to such cyber threats, like double-checking URLs before entering your information online and not clicking on suspicious links.
The bottom line
There are different BTC storage methods, and choosing one depends on your trading journey and needs. If you plan to stay in the crypto game in the long run, a cold storage wallet is the best option, as it provides increased security.