How can I keep my Bitcoin safe?

You can safely store your Bitcoin using hot or cold wallets. But always remember: Not your keys, not your crypto.

While we’re going to be talking about the best Bitcoin wallets in this guide to Bitcoin, it’s important to note that a ‘wallet’ isn’t as you think it is.

Bitcoin is not actually coins that move around and therefore, a Bitcoin wallet does not actually hold them.

Technically, Bitcoin wallets merely facilitate the transfer of Bitcoins and give ownership of the Bitcoin balance to the owner of the corresponding set of public/private keys.

While it seems like you have Bitcoin in your wallet, you actually just have access to a private key that corresponds to that balance on the distributed ledger (blockchain).

Types of Bitcoin wallets

With that in mind, there are two types of Bitcoin wallets.

To put it simply, a hot wallet is connected to the internet while cold storage keeps your keys entirely offline.

Hot wallets

A Bitcoin hot wallet refers to a wallet connected to the internet.

The most common type of hot wallet is simply the Bitcoin stored in your broker’s account.

But remember the saying ”not your keys, not your crypto”?

As we spoke about above, your wallet doesn’t actually hold your Bitcoin.

Only your private keys.

When your Bitcoin is stored in your broker’s hot wallet, they’re in fact holding those private keys on your behalf.

The advantage of a Bitcoin hot wallet is that they’re easier to access and make trading Bitcoin as easy as a few clicks on the broker’s platform.

But conversely, hot wallets require you to trust a third party with your keys.

A big price to pay for convenience.

Best brokers to store Bitcoin in a hot wallet

Here is a selection of the best Bitcoin brokers who offer Bitcoin hot wallets:

Binance
Bittrex

Cold storage

Bitcoin cold storage refers to a wallet that is not connected to the internet.

The most common type of Bitcoin cold storage device is an encrypted, portable device that stores your private keys offline and gives you access to your balance.

While you must make a transfer to a hot wallet in order to trade, by having full control of your keys, you and only you are in control of your balance.

As you can see, cold storage is the more secure option.

But they’re also less convenient and you pay for the privilege of control with a good cold storage device costing in excess of $100 USD.

Best Bitcoin cold storage devices

Alternatively, here is a selection of the best Bitcoin cold storage devices.

Trezor
Ledger Nano S

When to use cold storage to keep your Bitcoin safe

The clear tradeoff between Bitcoin hot wallets and cold storage is convenience for security.

Here’s an analogy for you.

Are you comfortable leaving your entire life savings under your hotel room mattress where management and cleaners can access or grant others access to your room at gunpoint?

This is essentially what you’re doing by leaving all your Bitcoin on a broker’s hot wallet.

Doesn’t sound like a good idea.

You should only be leaving as much Bitcoin in your hot wallet as you need to trade or transact within the extremely short term.

The rest should always be held in a safely stored cold storage device.

Best of probabilities to you.

Direct from the desk of Dane Williams.

Why not leave a comment and share your thoughts around keeping your Bitcoin safe in the comments section below? All comments that add something to the discussion will be upvoted.

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