Around 34 million adults in the US own cryptocurrency.
Since Bitcoin’s invention in 2009, blockchain technology has exploded. There are now thousands of different cryptocurrencies available. If you’re planning on investing, you need to know what the most secure way to store Bitcoin is, and what other options are available.
For a guide on how to store Bitcoin, keep reading.
What Is a Bitcoin Wallet?
Bitcoin wallets, or crypto wallets in general, are ways to store cryptocurrencies. With crypto, there are no physical coins, and everything is stored digitally. There are different storage options, each with advantages and disadvantages.
Most people buy Bitcoin from a third-party exchange. But when you buy it, where does Bitcoin go? Typically, it transfers to your custodial wallet, which is part of your account on the exchange.
This is very convenient, and you can then trade or sell your crypto from here. Some exchanges even offer other features like staking or purchasing NFTs (non-fungible tokens).
The main concern with these is security. If someone manages to hack the exchange, they could steal the funds in your wallet (along with everyone else’s). Because of this, it’s not a good idea to store large amounts of crypto on an exchange. Most people will send their crypto to either a soft wallet or a hard wallet after they’ve purchased it.
Also known as digital wallets or hot wallets, these are typically available as browser extensions and mobile apps. Soft wallets are secured with a 12-24 word seed phrase, so when setting a wallet up, make sure you record this. It’s generally better to write it down instead of storing it on a computer or mobile device, as it could be vulnerable in the event of a cyber attack.
There are many different soft wallets available with a range of features and capabilities. You can also deposit cash into a soft wallet through a Bitcoin ATM. You can find out more about how to do that in this article.
Seed phrases make soft wallets more secure than online exchanges, but they’re still somewhat vulnerable. The most secure option available for storing Bitcoin is in a hard wallet.
Sometimes called cold wallets, these are physical devices that can be used to store a variety of cryptocurrencies. They also have seed phrases like soft wallets, but what makes them so secure is the way transfers are made.
To perform any transaction, a hard wallet must be physically connected to a computer, and transfers are done manually. Because they aren’t always connected to the internet like soft wallets and custodial wallets, it’s much harder for other people to gain access to the funds they hold.
The Most Secure Way to Store Bitcoin
Custodial wallets are the easiest to deal with but offer the least security. Hard wallets are the most secure way to store Bitcoin. Soft wallets are a reasonable middle ground between the two.
How you choose to store your Bitcoin is up to you. When first starting out, a soft wallet may be the best choice, but if you have large amounts of crypto then going for a hard wallet is generally a good idea.
For more tech articles, check out some of our other blog posts.