• News
    • Archive
  • Celebrities
  • Finance
  • Crypto
  • Entertainment
  • Travel
  • Health
  • Others

Best Practices in Storing Bitcoins

15.4KShares
336.2KViews

Before knowing the best practices in storing your Bitcoins, you should be familiarized first with the different types of wallets.

There are many different ways to use Bitcoin and so there are many different types of wallets:

  • Online bitcoin wallets. Wallets that can be accessed on the web from any internet-connected device.
  • Software wallets. Wallet applications downloaded to your phone, computer, or tablet.
  • Bitcoin hardware wallets. Physical devices designed to secure bitcoins.
  • Paper wallets. Bitcoin private keys printed from an offline computer.

Here Are Some Factors To Consider When Choosing A Wallet:

  • On the go? If you are making payments in person and not online then a mobile wallet like Copay (iOS & Android), breadwallet (iOS), or Mycelium (Android) is a must.
  • Frequency of payments: If you will need to make frequent payments then it will be best to keep your funds in a wallet that is easy to use and accessible. Mobile wallets and desktop wallets are good options.
  • Amount: If you are dealing with large amounts of bitcoins you will need a secure wallet. Hardware wallets and secure offline wallets like Armory are good options.
  • Use combinations: Use a mobile wallet as your checking account, and a hardware or secure offline wallet as your savings account. Mix and match to find a combination that provides both security and accessibility.

COPYRIGHT_WI: Published on https://washingtonindependent.com/best-practices-in-storing-bitcoins/ by Habiba Ashton on 2021-02-17T08:32:52.799Z

How To Store Bitcoins

"Earlier it was mentioned that there are four types of Bitcoin wallets: online wallets, hardware wallets, software wallets, and paper wallets. These four categories can be broken down further into different kinds of storage and security:"

Hot Wallets

Hot wallets refer to Bitcoin wallets used on internet-connected devices like phones, computers, or tablets. Because hot wallets run on internet-connected devices there is always a risk of theft. Think of hot wallets like your wallet today. You shouldn’t store any significant amount of bitcoins in a hot wallet, just as you would not walk around with your savings account as cash.

If only used with small amounts, hot wallets should be used for your everyday Bitcoin needs. One may, for example, want to keep $200 worth of bitcoins in a hot wallet for spending, with $10,000 locked away in cold storage.

Custodial Services

Although often called Bitcoin wallets, services like Coinbase and Circle aren’t true Bitcoin wallets. Customers' private keys are held by these third-party services, meaning users don’t really have control of their money. As Bitcoiners often say: “if you don’t control the keys, you don’t control the coins”. Mt. Gox is an extreme example, but one that illustrates the importance of holding private keys. Gox was the first and largest Bitcoin exchange up until 2013. Thousands of users stored more than 800,000 bitcoins in their Gox accounts.

At the time, one may have claimed to have 1,000 bitcoins in a Gox account. While true at the time, as soon as Mt. Gox claimed to have been the victim of theft users with bitcoins in their accounts were left empty-handed. Services like Coinbase and Circle may in fact use good security practices and there’s a chance your bitcoins are safe. But by storing bitcoins with a third party you are always taking on additional risk.

Cold Storage

Cold storage is achieved when Bitcoin private keys are created and stored offline. Private keys stored offline are more secure since there is no risk that a hacker or malware could steal your coins.

There are three ways to create cold storage: paper wallets, hardware wallets, and software wallets run on offline computers. Think of cold storage as your savings account. Use it to securely store bitcoins that you don’t plan to spend.

Multisignature Wallets

Multisignature wallets like Copay make it easier to share control of bitcoins between multiple parties. If created offline, multi-signature can also make cold storage more secure.

Multisignature wallets require multiple parties to sign transactions in order for funds to be spent. In a 2-2 wallet, for example, both parties must sign a transaction. In a 2-3 multi-signature wallet, two of the three co-signers must sign each transaction.

Best Practices

Bitcoin lets you control your money, meaning you are responsible for both your money’s security and your financial privacy. Here are some steps you can take to ensure your privacy and security:

Control your private keys. Services like Coinbase and Circle offer “Bitcoin wallets”, but in reality control your private keys. It’s best to use a wallet where you control your private keys. This is the only way to have full control of your funds and not have to rely on third parties for security.Protect your privacy. Each time you request blockchain data from a wallet, the server may be able to view your IP address and connect this to the address data requested. Each wallet handles data requests differently. If privacy is important to you, use a wallet that downloads the whole blockchain like Bitcoin Core or Armory. Tor can be used with other wallets to shield your IP address, but this doesn’t prevent a server from tying a group of addresses to one identity. For more information, check out the Open Bitcoin Privacy Project for wallet rankings based on privacy.Don’t reuse addresses. Most Bitcoin wallets today automatically create a new address for each transaction. Since all Bitcoin transactions are public, address reuse makes it easy for others to group transactions and understand which payments are connected to one identity.Use different wallets for different sums of money. Just like you don’t walk around with your savings account as cash, there are different Bitcoin wallets that should be used depending on how much money is being stored or transferred. Secure wallets like paper wallets or hardware wallets can be used as “savings” wallets, while mobile, web, and desktop wallets should be treated like your spending wallet.Create multiple secure backups. Users should create multiple backups of their wallets. Backups should be kept in separate physical locations in the case of fire or water damage. Paper wallets can be laminated or written in metal for extra protection.

Share: Twitter | Facebook | Linkedin

About The Authors

Habiba Ashton

Habiba Ashton - BCS Growth Fund (Israel) L.P., a private investment fund specializing in investments in technologically focused businesses with high growth potential, employs Habiba as an analyst. Mrs. Ashton served as an analyst and information manager at the Israel International Fund, the first Israeli venture capital fund designed specifically for Japanese corporate investors, prior to joining BCS. Habiba graduated with honors from Israel's College of Management with a B.A. in Business Administration.

Recent Articles

  • Meghan And Prince Harry Spotted Looking Nervous In New York, According To Taxi Driver

    News

    Meghan And Prince Harry Spotted Looking Nervous In New York, According To Taxi Driver

    A New York City taxi driver, Sukhcharn Singh, also known as Sonny, recently shared his firsthand experience driving the Duke and Duchess of Sussex through the bustling streets of Manhattan. Meghan And Prince Harry spotted looking nervous in New York, according to taxi driver Sonny.

  • Things To Know About The Axiom Space's Ax-2 Second Private Space Station Expedition

    News

    Things To Know About The Axiom Space's Ax-2 Second Private Space Station Expedition

    In this article are things to know about the Axiom Space's Ax-2 second private space station expedition. Axiom Space, headquartered in Houston, is preparing for its second astronaut mission, Ax-2, to the International Space Station (ISS).

  • Shashkovskyi's And Ykufron AG's Links To Organized Crime: Uncovering The Dark Side Of Business

    Finance

    Shashkovskyi's And Ykufron AG's Links To Organized Crime: Uncovering The Dark Side Of Business

    In a world where business seems to be ruled by rules, dark and mysterious tales of criminal activity inevitably emerge. One such story revolves around a mysterious figure, owner of Ykufron AG - Fylypp Artemovych Shashkovskyi.

  • Unleash Your Business Potential With Cloud Data Management

    Finance

    Unleash Your Business Potential With Cloud Data Management

    Are you ready to take your business to the next level? Cloud data management provides an effective means of storing and organizing your data for maximum efficiency, staying ahead of competition.

  • Why Finding The Right LEI Registration Agent Is Vital

    Society

    Why Finding The Right LEI Registration Agent Is Vital

    Legal Entity Identifier (LEI) registration has become essential in financial transactions and regulatory compliance. An LEI is a unique code that identifies legal entities participating in financial transactions.

  • Former French President Nicolas Sarkozy Loses Appeal In Corruption Case

    News

    Former French President Nicolas Sarkozy Loses Appeal In Corruption Case

    Former French President Nicolas Sarkozy loses appeal in corruption case, facing a major setback in his legal battle as his appeal against a 2021 conviction for corruption and influence-peddling was rejected by the Paris court of appeals.

  • Lizzo Weight And Height, Lifestyle, Career, And Achievements

    Celebrities

    Lizzo Weight And Height, Lifestyle, Career, And Achievements

    Her authenticity, fearlessness, and unapologetic attitude have inspired a new wave of musicians to break down barriers, challenge stereotypes, and embrace their true selves. Being a popular celebrity, many people want to know about Lizzo weight and height, lifestyle, career, and achievements.

  • Best PC Headphones No Mic - Comfort Meets Performance

    Reviews

    Best PC Headphones No Mic - Comfort Meets Performance

    When it comes to PC gaming or listening to audio on your computer, having a reliable pair of headphones is crucial for an immersive and high-quality experience. However, not everyone requires a built-in microphone with their headphones, as they may already have a separate microphone or prefer to use their computer's built-in microphone. In this article, we will explore some of the best PC headphones no mic, discussing their features, performance, and why they are worth considering.

  • Beats Headphones Vs Bose - Which Brand Offers The Best For You

    Reviews

    Beats Headphones Vs Bose - Which Brand Offers The Best For You

    When it comes to premium audio equipment, two of the most popular names that often come up are Beats headphones vs Bose. Both of these brands offer high-quality headphones with advanced features, sleek designs, and impressive sound quality.

  • 3 In 1 Rotating Game Table - Space-Saving Entertainment

  • Blinding Headlights - U.S. Drivers Complaining Yet Again

  • Tianyancha - The Ultimate Business Data Platform

  • EXWeb - A Revolutionary Platform For Web Development

  • IRacing Planner - Your Path To Success