In today’s world of cryptocurrencies, security is one of the most crucial aspects of holding digital assets. As cryptocurrencies are becoming more and more mainstream, it is important to take extra measures to secure your digital investments. One of the best ways to ensure the security of your cryptocurrencies is by implementing cold storage techniques. In this blog post, we will explore what cold storage techniques are and how they work, as well as some tips on how to keep your cryptocurrency wallets as secure as possible.
Cold storage is a method of storing cryptocurrencies offline, which means that your digital assets are not connected to the internet. This provides a high degree of security, as the potential for online attacks is minimized. Cold storage techniques range from storing your cryptocurrencies on a hardware wallet to placing them in a physical safe or even writing down your access codes on a piece of paper. The idea is to minimize the online presence of your cryptocurrency investments and decrease the chances of a cyber-attack.
Cold storage (cold wallets) holds your private keys, which are the secret codes that access your digital assets. Each wallet comes with a unique address that you can use to send or receive cryptocurrencies. When you want to send cryptocurrency, you’ll need to provide the recipient's address and the amount of funds you want to send, followed by confirmation. Once confirmed, the transaction will be recorded on the blockchain ledger.
A cold storage crypto wallet is essential for the security and management of your digital assets. Unlike traditional bank accounts, crypto wallets are decentralized and provide the holder with full control over their funds. Having a wallet ensures that you have full control over your funds. Plus, it allows for easy management of your investment portfolio.
Exchanges like Bitbuy store most of its funds in cold wallets, offline. Bitbuy meets and exceeds its own cold storage policy of 90% of customer funds to be held in a cold wallet. The percentages of customer funds held in cold storage for Bitcoin, Ethereum, and USDC are above 95%, with an average cold wallet storage of 98.12% across all assets in the 2022 Proof of Reserves Audit.
Hardware wallets are small physical devices that allow you to securely store your cryptocurrencies. These devices are designed to be secure and tamper-proof, so you can store your digital assets with confidence. The hardware wallets are also password protected, ensuring that only you have access to your cryptocurrencies. Hardware wallets can be bought online or from stores that specialize in cryptocurrency-related products. The two most popular hardware wallets are Ledger and Trezor. Both offer a high level of security, are easy to use, and support multiple cryptocurrencies. However, they come with a higher price tag than their software counterparts, with prices ranging from $60 to $200.
Desktop wallets are a type of software wallet that is installed on your computer. They offer greater security than online wallets, but are still vulnerable if your device is hacked or infected with malware. Desktop wallets are particularly useful for investors who frequently trade or engage in peer-to-peer transactions. Some popular desktop wallets include Atomic Wallet, BitPay, and Bitcoin Core.
Mobile wallets are software wallets designed specifically for mobile devices. They offer convenience and accessibility, allowing users to manage their assets on-the-go. However, they are also vulnerable to hacking and theft if your device is lost or stolen. Some popular mobile wallets include Mycelium, Jaxx, and BRD. If you choose to use a mobile wallet, it's important to secure your device with a strong password and enable two-factor authentication.
Paper wallets are a simple and cost-effective way to store cryptocurrencies offline. Essentially, a paper wallet is a piece of paper that contains your access codes and private keys. Although paper wallets can be created at home, it is recommended that you use an offline computer to ensure that your private keys are not compromised. Paper wallets should be stored in a physical safe or other secure location to prevent them from being lost or stolen.
Physical safes are an excellent way to store your cryptocurrencies, and they’re particularly useful if you’re holding a significant amount of digital assets. A physical safe can protect your hardware wallets, paper wallets, or other offline storage mediums. We recommend that you invest in a high-security safe from a reputable manufacturer to protect your digital investments.
Cold storage techniques are an excellent way to protect your cryptocurrencies, but it’s also essential to maintain good cyber hygiene practices. Some tips include enabling two-factor authentication (2FA), using strong passwords, and logging out of your cryptocurrency accounts after each use. Additionally, regularly checking your account for unusual activity can detect if there have been any unauthorized access attempts.
Choosing the right crypto wallet depends on your requirements and preferences. For instance, if you intend to hold large amounts of cryptocurrency, need maximum security, and would like to take advantage of the self-custody capabilities that crypto gives you, then consider going for a hardware wallet. On the other hand, if you are just getting started with crypto and prefer convenience and flexibility while trading, a user-friendly software wallet, or a web wallet provided by a trusted exchange would suffice. Always do your research before selecting a crypto wallet.
Once you have have an account with Bitbuy, you automatically receive a wallet where you can store any amount of the tokens available on the platform. This is covered by the cold storage policy and insurance policy offered by our qualified custodian. You can easily move funds in and out of these wallets either scanning the QR code or entering the specific wallet address.
Once you buy cryptocurrency on Bitbuy, you also have the option to transfer your cryptocurrency from the Bitbuy platform to your own hardware wallet. This allows you to take full advantage of the self-custody capabilities of cryptocurrency if you feel comfortable enough to do so. To transfer your crypto to your own hardware wallet from your Bitbuy account, click on the "Withdraw” option and then select “Withdraw crypto”. Select the token you would like to withdraw followed by the amount, and then paste your hard wallet address as the recipient wallet.
In conclusion, the security of your cryptocurrency investments is essential, and cold storage techniques can provide an excellent way to protect your digital assets. Whether you’re using hardware wallets, paper wallets, physical safes, or a combination of these methods, implementing cold storage techniques will make it much more difficult for potential cybercriminals to access your cryptocurrencies. Remember to maintain good cyber hygiene practices on top of using cold storage to ensure the security of your cryptocurrency investments.