Where do whales store their Bitcoins? Of all Bitcoin wallets, less than one percent are active. This means that most of it is being stored in wallets around the world. Have you ever wondered how these wallets are kept safe? Are they offline or in paper wallets? In this article we’ll explore how to safely store big amounts of BTC. Just the way fiat currency is stored in a wallet, physical or digital cryptocurrencies are stored in mobile wallets, on desktop wallets or a paper wallet.
Every wallet that holds cryptocurrencies holds a set of private keys that need to be stored securely. When you store your Bitcoin in a wallet on a cryptocurrency exchange, the exchange has control of your private keys. Every wallet contains a set of private keys without which the bitcoin owner cannot access it. The biggest security risk is losing private keys or having the private key stolen. Users may also lose access to their Bitcoin due to malfunctioning or crashing of the device/ wallet.
The most popular way for storing huge amounts of Bitcoin is a Hardware Wallet.
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Hardware Wallets
These are more secure than desktop and paper wallets. These wallets could be devices like Trezor, Ledger Nano S or a simple USB stick. These wallets ensure that you have complete anonymity and there is no personal information linked to the hardware, so no identifying data which could be leaked. While hot wallets are susceptible to attack, hardware wallets are resilient to malware. It’s easier to recover the funds in a hot wallet, using a seed phrase. On the other hand, if you lose the hardware wallet, there is no other way of recovering your Bitcoin.
Paper Wallets
Another popular wallet for cryptocurrency is the paper wallet, but those require a sound understanding of cryptocurrencies. Paper wallets are generated online through several websites and they offer greater security. Paper wallets are easy to store, easy to manage and they offer complete anonymity. It’s simply a private key printed out on a piece of paper.
To ensure the security of your Bitcoin, it’s important that you take additional precautions like making backup copies and keeping up with software updates. If you’re using a paper wallet, make copies and keep them safe. Backup your entire bitcoin wallet early and often. In case of a device failure or malfunction, backups may be the only way to recover your assets. You need a strong passphrase/ password and backup this as well.
Software Wallets
Software and Desktop wallets are secure apps that keep your keys safe but it’s very important to keep your software up to date to ensure better security and the safety of your Bitcoin. Wallets that are not updated are soft targets and it is recommended that you update your software wallets with the latest security fixes and protocol.
How do cryptocurrency exchanges store big amounts of BTC?
The quick answer is Multi-sig wallets.
The concept of Multi-signature wallets has become popular in the past two to three years due to the prevalent hacks on cryptocurrency exchanges. These wallets require approval from several people for a transaction to take place. This limits security threats to more than a single controller. The people who initiate a transaction require others in the group to approve the transaction.
There are several ways to safely store big amounts of BTC and the ones listed here are just a few. If you know more ways of storing BTC, share them in the comments. We’d love to hear from you.
Disclaimer
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