Earning Bitcoin through mining and trading isn’t the most challenging part of a successful Bitcoin wealth creation journey; storing earned Bitcoin is. Cybercriminals often target the Bitcoin you’ve already earned, which means you need extra effort to secure your earnings. If the storage mechanism you choose is fragile, you’ll lose your coins within a short period of earning them. Whether you’re looking to upgrade your Bitcoin storage mechanism or for a robust option to get you started, here are some safe ways to do it.
Crypto Exchange or Custodial Wallets
A crypto exchange is a digital platform that allows you to purchase Bitcoin using real money, like USD. You can also trade different types of cryptos and exchange your Bitcoin for cash through the platform. For example, when you buy Bitcoin with Kraken, the platform allows you to sell or trade your Bitcoin balance for another crypto like Ethereum.
Most crypto exchange platforms are run like any other online platforms and are considered centralized as they don’t utilize blockchain technology. They are more popular than their decentralized counterparts, which are more complex despite supporting direct peer-to-peer transactions.
An account on a centralized crypto exchange can also be described as a wallet. Storing your Bitcoin in such an account/wallet means the business retains control of the assets, and you can’t access the private keys. With this wallet, you have to trust the company handling the exchange to take control of your assets and keep them secure. This kind of wallet can also be called a custodial or hosted wallet.
Non-Custodial Wallets
These wallets are either hot or cold and are used for storing private keys where the user is the only party involved. Here’s a breakdown of what each type entails:
Hot Wallets
Hot non-custodial wallets are software-based crypto wallets that store your keys and are connected to the internet. Once you buy your Bitcoin assets, these wallets help you control your wallet's private keys and seed phrases at your convenience.
While these wallets give you the convenience of online access through browsers and apps, their security can easily be compromised. When using a hot wallet, it’s crucial to seal any cybersecurity loopholes that may compromise the safety of your assets.
You can employ security best practices, such as backing up your Bitcoin wallet early and frequently and updating your software to minimize hackers' easy access. Another safety measure quickly gaining popularity is the multi-signature, which involves transaction approval from multiple parties.
Cold Wallets
These are also called offline or hardware wallets because they are not connected to the internet and require a hardware setup. In most cases, the hardware device in use ranges from a USB device to dedicated hardware with customized security and accessibility features. Sometimes, paper-based documentation is used to run cold wallets, but this is an unlikely approach based on paper’s fragility. Whether you pick a hot or cold wallet based on your preferences, you should follow all the essential security standards, like not sharing your passwords and IP addresses with anyone.
As cryptocurrency and Bitcoin continue to grow in popularity, cybercriminals continue to advance their criminal ways. It’s important that you choose your Bitcoin storage mechanism with care, as this will determine how successful your crypto investment becomes.
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