Digital Wallets: The Only Way to Store Bitcoin Safely
Cryptocurrency-based crimes keep climbing up as the years go on. That doesn’t mean that dealing in bitcoin isn’t safe.
If you know how to store bitcoin and avoid scams, you don’t have much to worry about. If you don’t, you might run into issues.
The best way to keep track of your cryptocurrency is by familiarizing yourself with the different types of bitcoin wallets. All of them come with their own level of security.
You’ll also need to keep your wallet updated, download antivirus software, come up with a killer password to secure your account, and watch out for common scams. These are only a few tactics that people use to keep their digital wallet safe. Keep reading to learn more.
Types of Wallets
Before you can go to bytefederal.com and deal in bitcoin, you’ll need to set up a wallet. There are a couple of ways to go about it.
You could use a paper wallet. If you’re worried about your kids scribbling on it, you can use a flash drive or set up an online wallet.
Custodial Wallet
This is probably the easiest crypto wallet to manage because it takes no effort on your part. A third-party company will hold on to your bitcoin for you.
They manage your cryptocurrency using online or offline storage. It’s not too uncommon for them to use a combination of both these options too.
If you want some control over your finances, some companies will allow you to transfer your bitcoin from your custodial wallet to your personal one.
When it comes to physical wallets, it’s easy to lose your access to them. If you break your flash drive, you lose your bitcoin.
That’s something you never have to worry about with your custodial wallet. As long as you have access to your account, you’re fine.
The downside of using a custodial wallet is that you’ll have to rely on the third-party company’s security. If they experience a data breach, your finances will be in danger.
The best way to avoid that unfortunate scenario is to do your research. Learn what sort of security measures a company uses before you trust them with your money.
Cold Wallet
When choosing a digital wallet, you need to learn the difference between a cold wallet and a hot wallet. We’ll go over cold wallets first.
A cold wallet allows you to store your cryptocurrency without an internet connection. Paper and hardware wallets both fall into this category.
Paper wallets are the best option you can use if you want to keep your identity hidden. The drawback is that if your child decides to color on it, you’ll lose access to your money.
If you’re printing your paper wallet, you lose some of the security benefits. Someone can hack into your network and get your information.
The most common type of hardware wallet is a USB drive. Nobody can hack into them. Your personal identity will be kept completely private.
It’s impossible to infect these wallets with viruses of any kind. If you lose the key that’s attached to your USB drive, you can use something called a seed phrase to get it back.
You’ll need to be careful not to lose your USB drive or heaven forbid, step on it. If you do, there will be no getting into your account.
No matter what type of offline wallet option you decide to use, know that it will run a lot slower than an online one.
Hot Wallet
You can’t get into your hot wallet without having an internet connection. The most common way to get one is via a mobile or desktop program.
They give you complete control over your finances, most wallet apps are 100% free, and they’re so simple to use that a cryptocurrency novice can work their way around them.
One thing that hot wallets and cold wallets have in common is that if you lose access to your app, you can use a phrase to get back into it.
The biggest downside of hot wallet apps is that they’re easy to hack. It doesn’t happen to people often, but if you have a lot of bitcoin, it’s a risk that you might not want to take.
Physical Coins
The last method of how to store cryptocurrency is physical coins. They’re little stickers that contain a set amount of bitcoin.
They have a lot to bring to the table in terms of security. You won’t need to have an internet connection to use your coins. You’ll also get to have complete control over your finances.
We’ll warn you that ordering your physical coins will be more expensive than buying the bitcoin itself. You’ve got to deal with shipping and manufacturing costs. Of course, like with physical money, someone can snatch your coins from you.
Setting up Your Wallet
Both hot and cold wallets come with some level of setup. Digital wallets are the easiest ones to deal with in this regard.
All you have to do is download the program. The app will run you through the necessary setup steps from there.
Paper wallets are a little more complicated. You’ll have to generate a private key, download the wallet, and print it out.
As far as hardware wallets go, you can buy one from a vendor. After that, it’s all a matter of plugging the device into your desktop computer and following the prompts.
Security Precautions
Any crypto wallet is secure if you follow the right precautions. It’s harder to hack into your account if you use antivirus software.
You’ll also need to back up your data, use strong passwords, and download software updates. That’s only the tip of the iceberg.
Software Updates
When developers notice a security hole in their wallet app, they work tirelessly to patch it up. They release the fixes as a patch known as a software update.
If you don’t download the update, you’ll leave your cryptocurrency vulnerable to hackers. It’s not only the app that you have to keep updated.
Whenever there’s an update to your computer or phone OS, you’ll want to download it. If you tend to forget about updating your device, set it up to do it automatically.
Backup
Whenever you make changes to your wallet, it’s not a bad idea to back it up. This way, if something happens to your computer, you’ll be able to recover your funds.
Like with the original wallet, make sure to put a secure password behind the backups so nobody can gain access to them but you.
Multi-Signature
If you have a multi-signature transactions setup, nobody will be able to touch your bitcoin without the approval of three or four other individuals.
If a hacker manages to get into your account, they’ll need multiple people to sign off on their activities. If just one person notices something fishy about the transaction, it won’t go through, and your coins will be safe.
Antivirus Software
Any device that contains a digital wallet needs to be protected by antivirus software of some kind.
When you run a scan, the program will detect any malware that’s trying to steal your information and get rid of it for you.
After downloading your antivirus program, run a full scan at least once a week. It’s also important to keep the program up to date. If you don’t, it won’t be able to do what it’s meant to do.
Strong Passwords
When it comes to protecting your finances, the more hoops you force a hacker to go through, the better. The best obstacle you can put in their way is a secure password.
It shouldn’t be shorter than 16 characters. Use a combination of numbers and letters. Don’t use the same password for your bitcoin wallet that you use for your social media account.
It’s important to note that if you lose your password, you’ll lose access to your funds. To this end, it’s okay to write your code down on a piece of paper.
If you do, make sure you keep it secure. Place the paper in a vault of some kind. It’s not something you want to scribble in a notebook that anyone could snag from you.
Recovery Contact
If something happens to you, that’s it. Your funds will be lost in the digital world forever.
If you want your bitcoin to benefit someone after you’re out of the picture, give them your wallet information. Obviously, make sure that your recovery contact is someone that you can trust.
Separate Email
Do you have your email address on your social media page? If so, you may want to link your bitcoin wallet to an email that you’re not using for anything else.
Since it’s not linked to your other online accounts, it will be a bit more difficult for hackers to learn about it.
Two-Factor Authentication
When you turn on two-factor authentication, you’ll have to use another device to log in to your wallet by typing in a code.
Nine times out of ten, this process involves sending a security code to your phone. If you’re extra paranoid, you can have the code sent to a SIM card.
Use a Secure Network
If you need to access your bitcoin wallet in public, do so by using a secure network. Opening your wallet app while you’re at your favorite coffee shop will leave you vulnerable to hackers who are on the same network.
If you have no choice but to access your wallet while you’re in a public area, do so using a VPN or your hotspot. It will encrypt your data.
Watch for Scams
Cybercriminals are crafty. They’ll send you a seemingly legit email informing you of bitcoin giveaways. If you follow the link in the email, the hacker will have access to all of your information.
To this end, don’t click on any unfamiliar links or give away personal information over the web.
Don’t Advertise the Amount of Cryptocurrency You Have
It’s okay to mention that you invest in bitcoin during a pleasant conversation. What you don’t want to do is advertise how much cryptocurrency you have in your account.
If cybercriminals are listening in, your loud proclamations will put a huge target on your back.
Be Careful With Your Social Media
Someone can learn everything about you that they need by heading to your social media account. As we mentioned before, it’s common for people to display their email addresses on their pages.
Some go as far as to give away their phone numbers and home address. It’s okay to have a social media page, but it’s recommended to keep it private to everyone but close family and friends to avoid making yourself a target.
Check Your Address Before You Send Money
One of your family members is short on funds and has asked you to send them money via Bitcoin. Before you hit that big confirm button and submit the funds, make sure the address it’s going to is correct.
Transactions are irreversible. If you’ve been hacked with malware, it can change the destination of your bitcoin. That’s why it’s always good to double-check.
How to Store Bitcoin the Right Way
Part of keeping your cryptocurrency safe is learning how to store bitcoin the right way. As you can see, there are tons of wallet options to choose from.
Once you pick the right one for you, keep it safe by securing it with a password and setting up two-factor authentication.
For more tips that will help you manage your cryptocurrency, visit the Tech section of our blog.
