In lower and middle-income countries, bitcoin and cryptocurrency usage is most rapidly increasing as an investment tool, for remittances, saving preservation, and as an alternative when financial services are difficult to access.

While usage has grown, and new products and services have simplified cryptocurrency handling for both novices and seasoned users, this expansion has also led to higher risk of thefts and hacks. Chainalysis blockchain analysts reported that 2022 recorded the highest cryptocurrency thefts, with $3.8 billion stolen. By 2023, the theft amount decreased to $1.7 billion, yet hacking incidents saw a rise.

Given no storage solution is infallible, it’s crucial to comprehend how to securely keep your cryptocurrency. Below are the methods available for storing your digital assets.

Upon purchasing bitcoin, you receive ownership of your assets, secured by two keys: a public key for encryption serving as your wallet address and a private key for decryption, which you must safeguard diligently.

The storage options are grouped into two main types: custodial and non-custodial, with four wallet varieties—desktop, mobile, hardware, and web-based:

Desktop wallet: Installed on your computer, this program isn’t the safest storage choice. Mobile wallet: Hosted on a mobile device, this method doesn’t offer high security. Hardware wallet: Similar to a USB drive, its security depends on its connectivity and interaction with other devices. Web-based wallet: Managed by an online service, this is insecure as it involves third-party key management.

The classification into hot or cold wallets depends on their internet connectivity.

Warning

Any tool enabling bitcoin access, including wallets and third-party apps storing or processing your keys, is vulnerable to hacks.

Important

Boost your digital currency’s safety by using a leading Bitcoin wallet with offline storage capabilities.

Non-Custodial Wallets

These wallets let you store your keys independently, without requiring any intermediary. Non-custodial wallets can function as either hot or cold wallets.

Hot Wallet

Most users use hot wallets for their bitcoin transactions, but they are susceptible to hacking due to the internet-connected environment where they operate.

Multi-Signature

Multi-signature (multi-sig) setups have risen in popularity, requiring approval from multiple parties for transaction completions. This requires predetermined members to authorize bitcoin transfers, creating a more secure transaction environment and reducing theft risks. However, ensure trust before participating in a shared wallet.

Before joining a multi-sig arrangement, always verify the other members and ensure mutual trust.

Seed Phrases

Acts as a master password, a seed phrase (or recovery/mnemonic phrase) comprises random words enabling key recovery if access is lost. These phrases, stemming from encrypted keys, facilitate wallet access and recovery.

Example of a seed phrase:

spare snake rather window lab bless night west industry trap jacket absurd detect inspire need robot lift elevator able volcano one memory link goat

Memorizing or securely writing down these words is simpler than the intricate 64-digit hexadecimal keys. Stamping kits can preserve these phrases on durable materials like titanium.

Commercial Non-Custodial Cold Wallets

Examples include the Trezor Model T, often resembling USB drives connecting to devices. These commercial methods offer superior safety compared to device-stored keys.

Many wallets store private keys paired with device-compatible software, enabling asset management without entering private keys.

While some products might offer Bluetooth or wireless connectivity, disabling these features after use enhances security. As these wallets necessitate connection to an online device, ensuring their safety is paramount.

Typically referred to as hardware wallets, commercial cold wallets prioritize offline security.

Alternative Non-Custodial Cold Wallets

USB drives, when encrypted and safeguarded, can provide a secure storage option comparable to commercial wallets. Regular disconnection, secure storage, and usage on a single device dedicated to key management enhance their reliability.

Historically, users would write keys on paper and store them in safes. This remains secure, but consider potential paper degradation or theft. Ensure only trusted individuals have safe access.

QR code generators were another storage method. Despite being feasible, avoid entrusting websites with your keys due to prevalent security threats.

Backup Protocols

Back up your bitcoin wallet regularly. In case of hardware failure, frequent backups may be crucial for currency retrieval. Store backups on multiple secure devices and apply strong encryption and passwords for added security.

Software Updates

Regularly updating software is essential because outdated versions are susceptible to exploitation. Ensuring your device’s software is current helps fortify your bitcoin’s protection.

Using Your Bitcoin

Transferring the required amount from cold to hot storage when utilizing your bitcoin is advisable for security. Post-transaction, move remaining assets back into cold storage to minimize risk exposure.

The public can see your hot wallet’s address, potentially attracting thieves to substantial holdings. Use blockchain explorers to verify this, noting that large balances are often theft targets.

Empty wallets eliminate theft risk, making them a logical choice for security-conscious bitcoin holders.

Regardless of crypto’s persistent allure, safe bitcoin key storage remains critical due to the threat from cybercriminals. Cold storage emerges as a secure alternative, necessitating prudent use and secure offline storage of the hardware wallet.

Remember, opinions and analyses here are purely for informational purposes. Consult reliable sources for crypto-related decisions, noting the author’s lack of crypto possession.