All about Bitcoin wallets: keep your money in maximum safety

It is likely that if you are reading this guide, you have recently decided to buy into this rapidly expanding market, simply to negotiate, but probably with the intention of keeping your crypto coins as a long-term investment. We've prepared this article to help readers learn how to safely store their crypto-coins.

The first and most important lesson in this guide is:

You, simply you are responsible for your crypto-coins. Your only concern needs to be: Security.

What is a criptomoeda portfolio?

It is a digital wallet that you can use to store, send and receive multiple crypto-coins. The wallet does not "store" your money exactly like a real-world wallet does. Instead, it stores your public and private keys, which in turn helps you send and receive money.

What is public and private key?

Think of a real-world situation before we understand what are public and private keys. Imagine a vending machine. Someone can put money into the machine, but, they can not take their money because they do not have the key, they can only put money into the machine. The only person who can take the money is the owner of the machine that holds the key.

In this example, the vending machine is the public address someone uses to send the crypto-coins to you. You are the owner of the machine that only opens with your private key. Using this private key, you can access your crypto coins and do whatever you want with it.

The public key is the address that anyone can use to send the crypto coins, while the private key is what you will use to access your wallet in order to "move" your crypto coins and send it to anyone else. Remember, ONLY you should know what your private key is, otherwise anyone can use your wallet to send your crypto coins to other addresses.

Under no circumstances should you lose your private key. Let's put it in super simple terms. If you lose your private key, then you are literally "HURT" (yes, capital letters have been used to emphasize the seriousness of the situation). You must use at least two different techniques to save and store your private keys. Let's discuss these various techniques a little later in the article.

Hot Storage X Cold Storage

Let us understand the basic distinction between the two with a real-world example. Hot storage is like the wallets you carry in your pocket. Cold storage is somewhat similar to your savings bank account. Keep this distinction in mind as we go along. If you want to use your coin frequently, you should use warm storage. On the other hand, if you want to store your money for a long period of time, you should use cold storage.

Hot Storage (Hot Wallet)

Hot storage, in simple terms, is when you keep your crypto on a device that is directly connected to the internet. This connection is what makes a device "hot".

For example exchange portfolios, desktop portfolios and mobile wallets. It's easy to access your crypto-coins in a warm wallet, and if you live somewhere that accepts crypto for payments, there's nothing wrong with using them for everyday spending. Think of it as the fiat currency (issued by the government). You can walk with an amount in a wallet for convenience, but most you keep it safe. Your warm wallet should behave in the same way as a real-world wallet. You should only use it to carry a small amount of cryptomoedas and thus facilitate access. That is all.

While transactions with hot wallets are very simple, there is a huge disadvantage when it comes to them. They are easily hackable. All crypto-space has been gaining a lot of value recently and where there is value, crime is never late. Recent ransomware attacks and online currency busting attacks should be enough examples.

Even if you are not storing too much value in your hot wallet, it is vital that you follow the backup steps inside the restore section of your wallet to avoid losses through a human error. With your private key and seed phrase intact, you can easily restore any wallet.

Hot storage pros

-Fast to access the crypto-coins.
-A large amount of options and support for different devices.
-The interfaces make sending and receiving simple.

Cons of hot storage

Exposed to cybercrime. Sophisticated hackers, ransomware and other malicious actors are a constant threat.
-Danishing the device could destroy the wallet. Without a careful backup of your private keys and seed words, you can permanently lose all your crypto-coins

Online Portfolios

These wallets are the easiest to use. The creation is super simple because basically it is to create your own account in any of the available services. In addition, you can access this wallet from any server or any device in the world, as long as you are connected to the network. That being said, there is a big problem when it comes to online portfolios. Your private key will be saved to another server. This is basically like serving your private key to hackers on a silver platter. DO NOT use online wallets to store large amounts of crypto coins. Store the minimum you need for business purposes only.

Desktop / mobile wallets

Desktop or mobile wallets are also popular wallet hot options. These are a much better option in terms of safety. Desktop wallets are downloaded and installed on a single PC or laptop and are only accessible from that device where it was downloaded. While it is a safer alternative than an online wallet, it can still be very inconvenient because you will not have access to your money unless you are on the device from which you have downloaded the wallet. MultiBit and Armory are great examples of desktop portfolios.

Mobile wallets are quite handy to use because all you have to do is download an application to your phone. MyCelium is a very popular app (for Android and iPhone) that people use for their mobile wallets, CoPay is also a great option.

The real problem with desktop and mobile wallets are the dangers associated with virus attacks. A hacker can easily put trojans on your system having access to your data. In addition, you may lose your crypto-coins if your device is damaged.

Multi-Signature Wallets (Multi-Signature)

The easiest way to understand how a multi-sig signature works is by thinking of a safe that needs multiple keys to operate. A multi-sign-up portfolio is excellent for 2 purposes:

To have more security for your wallet and rid it of a human error. To create a more democratic portfolio that can be used by one or more people

How does the multiple signature wallet save you from a human error?

Take the example of BitGo, one of the leading providers of multi-sig portfolio services in the world. They issue 3 private keys. One is owned by the company itself, one is owned by the user and the third is a backup that the user can save or give someone trustworthy to save. To make any kind of transaction in a BitGo wallet you will need at least 2/3 keys to operate. So even if you have suffered a hacker attack, it will be super difficult for them to get their hands on 2 private keys. And besides, even if you lose your private key for any reason, you still have this backup key you gave your friend

Now, how does a multiple signature wallet create a more democratic environment?

Imagine that you work in a company with 10 people and you need 8 approvals to make a transaction. Using software like Electrum, you can simply create a custom multi-sig wallet with 10 keys. In this way, you can make continuous democratic transactions in your company.

Even with all its incredible features, a multiple signature wallet is still a warm wallet, so you should use it "economically." The Bitfinex hack happened despite the fact that it had multiple signature security. Also, at the end of the day, the company whose wallet you are using still has one of the private keys. It completely depends on your ethics as to what they can and can not do with their crypto-coins.

Hot Storage Risks

The different options bring different security risks. The least secure ones are undoubtedly those hosted on exchange sites. Leaving your currency, where you bought it, might seem like a great idea, because "if it starts to depreciate, it will be faster to sell." In reality, what you are doing while leaving your crypto-coins in an exchange is to trust an entity your "money". In the past, they have succumbed to such threats. The exchanges are a big target for criminals because they store a lot of value. If you are a day trader, this risk is part of it. If you are saving for the long term, you will want to avoid this risk.

The Bitfinex hack is a great example of the dangers of hot storage. In early August 2016, Bitfinex personnel realized that several of their security measures were being compromised. In a short time, more than $ 72 million of the BTC was stolen by a hacker. It was so bad that the value of BTC dropped 20% in one day.

Cold Storage (Cold Wallet)

When you keep your crypto-coins in a fully disconnected device, it is called cold storage. For those looking for the safest form of storage, cold wallets are the best options. They are best suited for those who want to store their crypts for a long time, who do not need access to their coins for months or even years.

They are not risk free, but if you follow the instructions correctly and take all possible precautions, they are almost zero. Due to the great attention that crypto-coins are receiving in recent years, unfortunately, the interest of hackers has increased. Because of this, it is a much safer option to use cold storage as a means of storing your crypts.

What are hardware and paper portfolios? You'll know that in a minute. For now, let's look at the pros and cons of cold storage:

Pros of cold storage:

-The best place to store large amounts of cryptomade for an extended period of time.
-Provides increased security against hackers and malicious people as it is completely unplugged.

Cons of Cold Storage

• It is still susceptible to external damage, theft and human neglect in general.
  -Not ideal for fast and daily transactions.
  -Configuring it can be a bit difficult for beginners.

Hardware wallets

Hardware portfolios are physical devices where you can store your crypto-coins. They come in some forms, but the most common is in USB. Although many put their hand on fire by them, the hardware portfolios are still prone to failures. First of all, you trust that the company that made your wallet did not register all the private keys with the plan to steal everything in the future. Under no circumstances should anyone buy / use an already used hardware portfolio.

But it may be that someone loses or damages your hardware wallet and this can spell disaster for the beginner and even for veterans, the hardware portfolios can be restored. Therefore, it is very important to back up your hardware portfolio. You should keep the details of the restoration in a safe place, only you and a person you trust should know the details. Remember, the details of your restoration open the wallet. Think very carefully to whom you will share them. It is also vitally important that you transfer all the coins to a new wallet if something unfortunate happens between you and this other person who knows your private keys.

Paper wallets

Without a doubt, the safest way to store any encryption is to use a paper wallet. By following a few pointers below, you can set up a complete one for free. This really makes you the master of your investment, and if precautions are followed, there is no possibility that your private keys will be known to anyone else. Of course, that means keeping track of them is even more important. Losing private keys means you will lose all the contents of your paper wallet (but again, this is true for every wallet out there.)

But what is a paper wallet?

In a very simple explanation, paper wallets are an off-line cold storage method for storing your crypto-coins. That includes printing your public and private keys on a piece of paper that you should keep in a safe place. The characters are printed in the QR code form that in the future you can check to make all your transactions. The reason it is so safe is that it gives full control to the user. You just need to take care of a piece of paper.

Do you need a paper wallet?

The answer to this question will largely depend on your circumstances. If you plan on spending a few coins, maybe you will not need to. Alternatively, if you are expecting a long-term appreciation, then a paper wallet is the safest option available to you.

Risks of the paper portfolio

While paper wallets substantially reduce the threat of virtual world compromise, they are not at their own risk.

Coercion: There will always be people willing to break the law to get something valuable. Criminals may stumble into your safe. They do not know what there is, but presumed there is something valuable there. So it does not matter if you are online, or in your safe always be wary.

Fragility: Even if this piece of paper is stored 100 BTCs, it will still be a piece of paper. The paper may be easily damaged or may become worn out over time. That's why you should always do multiple backups.

Burglary: Once it is printed on a piece of paper, anyone possessing it or taking a picture of it can steal your money.

Type of printer used: The quality of the printer used can also have a detrimental effect.

Human Errors: Humans are prone to mistakes and you can simply forget where they saved or accidentally rip you off.

Importance of private keys and restore methods

We have already mentioned the details of the restoration before, the private key of your paper wallet is the most important detail. You must guard it as your life. If you lose, you can lose your money. It's that simple. So you should tattoo him on the chest, right? No. It must be kept totally secret.

In the near future, decentralized, cloud-based, self-encrypted storage is likely to be an option. Its reliability continues to be tested, but it can alleviate justified concerns when digitally storing private keys. As exchanges, existing cloud storage services are hackable and can be victims of malicious attacks. Storing your most sensitive documents is generally not recommended. However, you can encrypt the data yourself and store it online. When encrypting, you limit the number of people who can view a raw document. Uploading an encrypted version of a private key to the web is a good option for some.

Engraving in metal or acrylic

You can also choose to engrave the keys in a metal and keep it safe somewhere. The quality of the metal you choose will be paramount because over time a poor quality metal can deteriorate very fast.

Restoring a cold storage wallet

When you want to retrieve your crypto-coins stored in one, you need to import the private key into an appropriate online wallet. Any wallet that supports importing private keys will work. The process is simple and intuitive for most wallets.

Final considerations

Setting up a cold storage wallet is a direct way to help ease the risks. Although no method is totally free of threats, storing coins offline dramatically reduces the chances of losing your investment. Most importantly, always be vigilant about threats such as loss, theft, or damage to private keys. Always protect your private keys and be sure to replace them immediately if there is any indication that your privacy has become compromised.

The best solution is diversification. Always diversify. Keep a portion of your coin (an important part) in paper wallets and have lots of backups to ensure you do not get "screwed up". Keep some in hardware wallets and, if you really want to, keep some in a warm wallet too so you can make quick transactions. That said, make sure that most of your crypto coins are in cold storage.

Remember, the responsibility is yours alone. You're the boss. Do not take shortcuts and do not underestimate the importance of safety. Many people did not give their due value and ended up losing access to their crypto-coins.