bitcoin storage

The 4 different ways to store bitcoin

11th June 2024

Bitcoin is establishing itself as a premier store of value for seasoned investors. Experts predict stratospheric prices, prompting users and investors to adopt a secure storage strategy.

It is important to know all the methods for storing bitcoin, and understand that each has its advantages and disadvantages.

It is the purpose of this article to show you the different ways to store bitcoin in order to guarantee the longevity of your funds.

1/ Method of storage in online wallets

An online wallet, or “Online Wallet” or even “hot wallet” is a service that allows you to store, send and receive bitcoin via the internet. This is the easiest type of wallet to use because it can be accessed from anywhere and at any time. This type of wallet is not recommended for storage but rather for those who practice trading for example.

Advantages of Online Wallets

  • Exchanges allow you to buy and sell cryptocurrencies very quickly. Indeed, if your cryptocurrencies are stored on another type of wallet, you should first transfer them to an exchange before you can sell them. This can waste your time and prevent you from reacting quickly to market fluctuations. 

Disadvantages of Online Wallets

  • When you use a hot wallet, you are not the real owner of your cryptocurrencies. You don't have your private keys and therefore you depend on the platform that stores your funds. If this platform closes, is hacked or blocks withdrawals, you risk losing your bitcoins. Moreover, Online Wallets are prime targets for hackers. 

—> Read: Here are 6 good reasons to withdraw your bitcoins from exchanges

  • Other disadvantages are that transfer fees for withdrawing your funds from exchanges are often very high. Additionally, withdrawal limits may be applied (maximum amount per day). And finally, some platforms can block withdrawals until you have provided your personal information (“Know Your Customer” procedure). This can pose a real confidentiality concern.

How to choose your Online Wallet?

Before storing your cryptos in an exchange, you must understand that this type of wallet is only recommended for short-term operations and small amounts. In fact, Online Wallets are better suited for regularly trading small amounts of cryptocurrencies.

However, for added security, do not store all your funds in a single Online Wallet. James! Spread them across multiple platforms and also use physical wallets (like a wallet Bitbox for example) for increased security.

In addition, before choosing an Online Wallet, it is important to find out about the platform and its reputation. Make sure it is secure and has a good image within the community. Here are the most popular online wallets:

  • Coinbase;
  • Binance;
  • Kraken;
  • Crypto.com.

2/ The software wallets method

Software wallets are programs that you install on your computer or mobile device. They give you more control over your Bitcoins than online wallets because you keep the private keys on your own device. However, it is important to choose a reputable software wallet and take adequate security measures to protect your computer from malware. For this, two options are available to you.

1/ The Desktop Wallet: Your digital safe

Imagine an ultra-secure vault for your cryptocurrencies, accessible only from your computer. This is the concept of the Desktop Wallet. The advantages of this type of wallet are: 

  • Reinforced security: Your private keys, the access key to your cryptos, are stored on your computer, out of reach of hackers;
  • Full control: You fully manage your funds and transaction fees;
  • Optimal confidentiality: Your personal data remains private.

Among the most secure desktop wallets, we find Samourai Wallet or, Sparrow wallet.

As for the disadvantages, we have:

  • Vulnerability: If your computer is hacked, your bitcoins could be stolen;
  • Manual update: You must ensure that you keep your software up to date to ensure its security and compatibility.

The Mobile Wallet: Your bitcoin at your fingertips

For those looking for practicality, the Mobile Wallet is ideal. It is a wallet that comes in the form of a mobile application. This is a convenient way that allows you to manage your cryptos from your smartphone.

The advantages of Mobile Wallets are:

  • Permanent accessibility: Your cryptos accompany you everywhere, wherever you are;
  • Simplified payments: Send and receive crypto easily using QR code scanning.

Regarding the disadvantages, the following points are noted:

  • Relative security: Less secure than a Desktop Wallet, the Mobile Wallet is more exposed to hacking;
  • Risk of loss: If your smartphone is lost or stolen, your cryptos could disappear.

Which Wallet to choose?

The choice depends on your needs and your profile:

  • Security priority: Opt for a reputable and Open Source Desktop Wallet; (
  • Convenience above all: The Mobile Wallet is made for you, but be sure to choose a secure application;
  • Favor strong passwords and robust recovery phrases;
  • Beware of scams: Never reveal your private keys to anyone.

If you find yourself in the description of Software Wallets, here are some examples that might interest you:

3/ The Hardware Wallets method

Hardware wallets are physical devices dedicated to the secure storage of cryptocurrencies. They look like USB drives and provide the highest level of security for your Bitcoins. Private keys are stored offline on the device, making them nearly impossible to steal if hacked. However, hardware wallets can be more expensive than other storage options.

However, there are several advantages to purchasing a Hardware Wallet, including:

  • Reinforced protection : Unlike online wallets vulnerable to hacking, your private keys remain offline in the hardware wallet, safe.
  • Transactions with complete peace of mind : Carry out your transactions with confidence, even on an infected computer, without any risk to your cryptocurrencies.
  • Easy recovery: Even if your hardware wallet is lost or damaged, don't panic! Your seed phrase, a unique fallback phrase, allows you to recover your funds on another device.
  • Versatility: Many popular cryptocurrencies are compatible with hardware wallets, giving you great flexibility.

The price of security: a wise investment

Although the hardware wallet has a cost (around €149 for a Bitbox wallet for example), it is a valuable investment to protect your cryptocurrencies against growing threats. It is the ideal choice for regular users and those who hold significant amounts of cryptocurrencies.

bit box

The hardware wallet: peace of mind for your cryptocurrencies

By opting for a hardware wallet, you are choosing security and peace of mind for your investments in cryptocurrencies. Protect your digital assets today and enjoy the freedom and control that cryptocurrencies offer you.

However, not without weak points, hardware wallets can be criticized for some disadvantages:

  • It's more expensive storage options;
  • It is more complicated to use than online or software wallets.
  • There are updates to follow
  • A wallet is also not immune to the risk of having a virus…

Here are some examples of popular hardware wallets:

—> Read our essential article for a better understanding of security and storage: 10 tips to protect your hardware wallet.

The multi-signature wallet method: share responsibility, strengthen security

Multisignature (multisig) wallets add an additional layer of security to your Bitcoins. Instead of requiring a single private key to complete a transaction, multisig wallets require multiple signatures from different keys. This means that even if a hacker obtains one of your keys, they cannot steal your funds without the signatures of the other keys. Its advantages are:

  1. Protection against individual errors: Multisig wallets also protect against human errors. If you lose a private key or make a mistake with it, you are not locked out of your funds. Other keys can still be used to authorize transactions.
  2. Ideal for shared funds: Multisig wallets are perfect for storing funds shared between multiple people, as in a business or organization. They enable a clear distribution of responsibilities and reduce the risk of internal fraud.

Custodians and third parties: for institutional-level security

If you hold significant amounts of Bitcoin or are uncomfortable managing your own private keys, custodians and third-party custodians may be a wise option. These specialized companies store your Bitcoins for you and employ state-of-the-art security measures to protect them. 

Professional childcare services 

Reputable custodians like Coinbase and BitGo offer institutional-level childcare services. They are subject to strict regulations and adhere to the highest standards of safety, insurance and compliance.

Physical storage and physical security

Custodians store Bitcoins in secure cold storage, cut off from the internet, to protect them against online hacks. They also employ various physical security measures to prevent unauthorized access.

Transparency and reporting

Custodians provide clients with regular reports on their holdings and status. This allows users to track their Bitcoins and ensure they are always safe.

How to secure your bitcoins with self-custody

When venturing into the world of bitcoin, the security of your assets becomes a top priority. This is because you are responsible for protecting your private keys, which are essential for accessing your funds.

In fact, self-custody offers users complete control over their Bitcoins, but it also comes with significant responsibilities. To help you protect your valuable digital assets, here are some Bitcoin self-custody best practices:

  1. The importance of the private key : Your private key is a unique code that gives access to your Bitcoins. Think of it as a password to your Bitcoin treasure box. If it is compromised, anyone who has it can steal your funds. 
  2. Protection against prying eyes : Never share your private key with anyone. Never type it on websites or apps. Keep it offline, away from computers and internet-connected devices.
  3. Offline storage : Paper wallets provide a simple and secure method to store your private key. Print it on paper and store it in a safe place, such as a fireproof safe. For even greater protection, consider hardware wallets or durable metal wallets.
  4. Never in plain text : Never store your private key as plain text on your computer or device. Hackers can easily access it in the event of a security breach.

Final Thoughts on Bitcoin Storage

The best way to store your Bitcoins depends on your needs and risk tolerance. If you have small amounts of Bitcoin and are looking for convenience, an online wallet may be a good option. For added security, a software wallet or hardware wallet is preferable. If you are storing large amounts of Bitcoin, it is recommended to use a combination of offline and online storage.

Total
0
Shares

Moctar Bouraima

I am passionate about what Bitcoin can bring in terms of financial emancipation and it is with great joy that I share my articles on the subject; Whether it's blockchain, web 3, DeFi, because I know that it helps in one way or another to move the ecosystem forward.

Leave comments

Your email address Will not be published.

This site uses Akismet to reduce unwanted. Learn more about how your comments data is used.

Total
0
Share

Learn more about ZoneBitcoin

Subscribe to continue reading and have access to the entire archive.

Continue reading

Trade crypto on Changelly

changelly

Crypto tracker

coinstats app

On Google

googlenews

Do not miss :

bitcoin vpn

The 5 best VPNs you can buy with bitcoin

The world is becoming more and more digital and the
best open source wallet

The 6 best “Open Source” physical wallets to store your bitcoins and cryptos

A crypto wallet allows you to store, send and