You recently bought the dip, and you are excited about your new crypto journey. However, you are still a bit uneasy and unclear about the safety of your own crypto. Hearing horror stories about people losing fortunes on the internet has not helped you, either. Unlike traditional assets, crypto is decentralized, and so it is important to take precautionary measures with your existing or recently purchased crypto. The two most common ways that crypto disappears is through loss or theft.
Loss can be attributed to human error, by forgetting your passwords or by sending your crypto to the wrong address. It can also be attributed to your device malfunction, so it is crucial to choose a quality hardware device to store your crypto, but more on that later in this guide. Theft occurs if you get hacked, defrauded, or fall victim to a scam.
Digital assets like cryptocurrencies are stored in wallets, which are computer programs that allow you to store, send or receive cryptocurrency. A cryptocurrency wallet can be a device (like a physical medium) or program that stores your public and/or private keys for cryptocurrency transactions. Crypto wallets fall into two categories: Hot Wallets and Cold Wallets.
Image Source: Ledger.com
Hot wallets, or hot storage (online) is a cryptocurrency wallet connected to the internet. They exist by connecting to computer devices and a cryptocurrency network. Hot wallets are linked using the public and private keys that help facilitate transactions. But like anything connected to the internet, hot wallets can be vulnerable to cyber-attacks.
Cold wallets, or cold storage (offline) exist on a device or a physical medium that is not connected to the internet. Think of a USB flash drive. Cold wallets are more secure and safer than hot wallets because they are stored offline and can hardly be accessed by cybercriminals.
Exchanges like Bitbuy store most of its funds in cold wallets, offline. Bitbuy meets and exceeds its own mandate requiring 95% of customer funds to be held in a cold wallet. The percentages of customer funds held in cold wallet for Bitcoin, Litecoin, and Ethereum are above 98%. The slight variance in percentage between the virtual assets is minimal, with an average cold wallet storage of 98.12%. You can read our 2021 Proof of Reserves report here.
For a cold wallet, we recommend a Ledger Nano S. Ledger is a trusted name in the space and produced the original hardware wallet. Ledger nano S is a beginner-friendly, entry level wallet used by businesses and individuals alike. To purchase a Ledger Nano S please follow this link here. It is important to note that the Ledger is a separate software application from Bitbuy that can be used to store your crypto assets in cold storage.
Image Source: Ledger.com
Once your Ledger device is set up, you will have access to Ledger Live, the software that pairs with your hardware wallet.
Image Source: Ledger.com
It is important to note:
After completing the steps above, you will have safely put your Bitcoin or other cryptocurrency in a cold wallet. If you have any further questions on this process, please reach out to support@bitbuy.ca.