how to store bitcoin

Anything that allows you to access your bitcoin, such as third-party apps like wallets or anything else that stores or enters your keys for you, is susceptible to hacking. Many products and services have been introduced which make it more convenient for those that use or are new to crypto; however, the increased rate of adoption and use has led to an increase in hacks and thefts. In its annual analysis of cryptocurrency theft, blockchain analysts at Chainalysis found that 2022 was the worst yet in terms of the total value of crypto stolen—$3.8 billion. With that said, there are steps you can follow to help keep your crypto safe from cyberattacks, like protecting your passwords and never clicking on suspicious links. While many of the following strategies may sound familiar to anyone who has invested in stocks or commodities, crypto cybersecurity has some additional nuances we’ll explore below. Here are a few suggestions for improving the security of your crypto investments.

These words are easier to memorize and/or write down and store than the 64-digit hexadecimal keys. You can even purchase a titanium stamping kit to preserve and secure your seed phrase in your safe. In the past, some users used QR code generators, printed the keys and QR codes on paper, and then stored them in safes. This can still be done, but you’re allowing additional software access to your keys.

  1. If you have the option of using multi-sig, ensure you know the other people and trust them before joining the wallet.
  2. Fire and natural disasters—while seeming old-fashioned—can still pose a threat to your virtual currency.
  3. And if you think it doesn’t matter which wallet you decide to house your cryptocurrency in, consider the man who lost upwards of $220 million in Bitcoin because he forgot the password to his digital wallet.
  4. Crypto is also not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC), meaning you should only buy crypto with an amount you’re willing to lose.
  5. In September 2020, for instance, hackers stole over $281 million from Kucoin, one of the largest crypto exchanges.

Between 2011 and 2020, $11 billion was stolen in crypto hacking incidents, with a “significant amount” lost in hacks of crypto exchanges, according to research by Inside Bitcoins. If a lot of money is at stake, like if you are conducting a business that frequently deals with Bitcoin, or if you are paying some of your staff in cryptocurrency, then you need a hardware wallet. Hardware wallets look like USB sticks and store your Bitcoin private keys on a specialized chip, similar to the secure enclave in an iPhone. Secure hardware wallets like Trezor or the Ledger Nano S cost about $100 or less and have a straightforward setup. You just choose a PIN number and a recovery “seed” (usually a set of words and numbers) in case you forget your PIN, or your wallet malfunctions. It’s pretty robust security, so make sure you keep copies of your PIN and seed somewhere accessible to you, but not to home intruders.

Metal wallets

Also, don’t use websites that will generate codes or anything for you—you never know how your information is being stored and used on a website, and they are notorious for being hacked or hijacked. There are several methods that are safe from hackers and thieves you can use to secure your bitcoin keys. USB drives can be used just as effectively as a commercial wallet if you encrypt and safeguard them. Disconnect them when they’re not being used, store them in a secure place, make a backup, and only use them in one device for one purpose—keeping your keys.

The most popular solution for Bitcoin and other cryptocurrency storage is in a digital wallet, but that isn’t always the only solution. Here’s a quick breakdown of how the digital wallet storage method works and how it stacks up against four other potential solutions, including offline wallets, hardware wallets, paper wallets, and physical coins. A custodial wallet is managed by a third party, such as an exchange like Coinbase. In this arrangement, the custodian stores your private keys for you, guaranteeing their safety and sometimes providing insurance on holdings up to a certain amount.

When you purchase bitcoin, you’re given ownership of the amount you bought. The public key is used to encrypt information and create your wallet address, and the private key allows you to decrypt the information, or access your bitcoin. For most, the least stressful strategy will be to keep it on a traditional trading platform platform, where security measures are taken care of for you.

how to store bitcoin

Just make sure to encrypt the data in case the device is lost or stolen. You might even consider making a backup to leave in a safe deposit box. Allows for quick access to trading, exchanges shouldn’t be used for long-term storage of large cryptocurrency amounts.

Software Updates

Rather, every crypto storage solution stores the very specific information that is needed to access and transfer cryptocurrencies that are stored on a blockchain. If you’re thinking about getting in on the Bitcoin action, you need to understand how digital wallets work. Unlike a conventional bi-fold or even a stock portfolio, Bitcoin and other cryptocurrencies are stored in different types of digital or offline storage systems, each offering a variety of features and functionalities. Because of those that would rather steal from others than earn a living, it is necessary to store your bitcoin keys as safe as possible.

The most secure option is to get yourself a copy of the operating system TAILS, which comes with the Bitcoin wallet Electrum installed. Crawl under a blanket or tent, boot it up, and create a Bitcoin wallet. You write down the seed on a piece of paper and shut down the computer. Even if your phone or computer gets hacked, your hardware wallet would be unaffected. Since the wallet is password protected, someone who steals or finds your wallet would not be able to access it. If you are making a lot of transactions with low value (e.g., because you mostly use Bitcoin to buy socks, tea, or a VPN), then you should use a mobile wallet that you control the keys to.

Is It Worth Buying a Cold Wallet?

One of the original ways to store keys was to write them down on paper and place it in a safe. This is still a secure method; however, ink can bleed, paper can deteriorate over time or be lost, or someone can steal it. If you choose this method, you should make sure only trusted people have access to the safe and check on the paper periodically. Many of these wallets store your private key and come with software that works in parallel to your wallet device or program.

Choosing the Right Bitcoin Storage Solution

Experts caution against storing large amounts of coins through cryptocurrency exchanges, or in digital wallet apps on your smartphone or computer. The public-facing internet offers an attacker too many inroads to attempt to infiltrate your wallet, or trick you into giving them access. Paper wallets are the most rudimentary form of cold storage and are simply a public and private key (usually in an alphanumeric format, not as a seed phrase) printed on a piece of paper.

Seed Phrases

As the cryptocurrency industry continues to grow, there will likely be an increasing number of custody solutions that cater to a wide range of user requirements. If you are comfortable storing your assets in a financial institution like a bank, then a regulated financial institution may be the best fit for storing your crypto. Bitcoin and other cryptocurrencies are digital assets that are created and stored electronically on a blockchain network. Since cryptocurrencies solely exist as virtual data, this means they are not physically stored anywhere.

Take these precautions and bad actors will likely have a harder time getting your coins. However, if you’re committed to exploring relatively unproven coins, always research the founders’ backgrounds before you jump in. Ignatova, for example, had a history of frauds and multi-level marketing scams. The benefit of providing your own custody is that it gives you full ownership of your coins. You can use them however you want, including to pay for goods and services. They can also use pump-and-dump scams (known as “rugs”), where bad actors hype a coin to attract new investors.

From there, consider transferring it to a digital crypto wallet or a physical, USB-like device known as a “cold wallet.” Cryptocurrency exchanges have much to recommend them, including instant access to funds, plus the ability to quickly trade your Bitcoin for other cryptoassets. However, compared to other methods of storing your Bitcoin, they are generally considered to be a less secure option.

Once the price reaches a peak, they sell all their holdings at a profit and send the price falling. If you have significant savings in Bitcoin that you do not need to spend or move frequently, a paper wallet is best for you. Don’t use an online service to create your paper wallet, but rather create one yourself. Explore the user interface a bit before deciding where to keep your Bitcoin. A wallet installed on your mobile phone is still relatively convenient, as you will likely have it with you most of the time. Fire and natural disasters—while seeming old-fashioned—can still pose a threat to your virtual currency.

Luckily, there are many options for securely storing bitcoin, ranging from regulated exchanges to your smartphone, to a piece of paper. Before you choose a bitcoin storage method, it’s important to clearly understand the pros and cons of each approach, as well as what “storing” a virtual currency actually entails. Like an external hard drive or a USB stick, hardware wallets take cryptocurrencies like Bitcoin and store them on physical pieces of hardware. Hardware wallets are less common than digital wallets or offline wallets for Bitcoin and can be more difficult to locate.