While investors research what cryptocurrency is and how to trade in it. They pay a lot of attention to knowing about different coins or tokens and their performance and utility. However, they sometimes miss an important question – how to store bitcoin with Coin Culture? Unlike a bank account or an investment through a broker, storing cryptocurrency is your responsibility. This means, consider your crypto assets gone if you lose access to them. An issue that has occurred often since the introduction of bitcoin.
Even if you have been lucky enough to beat the crypto market volatility and choose to get the best crypto asset for investment if you go with the risky options of storing crypto you might end up losing your tokens as a result of theft, computer failure, loss of access keys.
The crypto world offers you several methods to store your tokens or coins and allows you to pick based on your preferences. These methods range from simple pieces of paper to applications and devices. Here is a guide that explains crypto storage methods to facilitate your decision.
Storing using custodial wallets
The custodial wallet is the most prevalent option to store cryptocurrencies where the third party store your assets. When you trade with the help of an exchange, stockbroker, or application, they by default store your coins in a custodial wallet.
They can use any method viz cold wallet, hot wallet, or a combination to store your currencies. Major benefits of custodial wallets are:
- The least amount of work is required to form your end
- These are easy to access for trading
- Losing your crypto wallet is not an issue as long as you can access it
Storing coins in a cold wallet
Cold wallets store your cryptocurrency offline. The most common form of this wallet for storing cryptocurrency is hardware. These are special devices that connect to your computer while you are buying or selling crypto. Each hardware wallet supports only certain types of cryptos.
Once you are done trading you disconnect them and your assets are stored offline. Investors prefer these wallets because:
- It is considered highly secured as your assets are offline except when you are trading
- Every time you connect these devices, an address is generated to send and receive coins
- Since it is hardware-based, hacking is the least possible
Using hot wallets for storing crypto
A hot wallet is a software that stores your currencies online. These come in the form of a desktop or mobile applications. Some of them are also web-based wallets that you do not install on your device.
Since your crypto is stored online, this method always has a greater risk of hacking as compared to the other methods. However, similar to cold wallets, these also provide you with a recovery period during which you can recover your crypto in case of loss of access. Some of its positives are:
- You have ample control over your crypto
- Almost all hot wallets are free
- These types are very easy-to-use and allow rapid transactions
Storing in a physical wallet
A free paper wallet, also known as a physical wallet, is another form of previously discussed cold wallet but is not as popular as hardware ones for storing cryptocurrency.
Physical or paper wallets are essential prints of your private and public keys in the form of scannable QR codes. You use the public key to receive your bought currency and scan both the public and private keys to send your crypto.
These wallets offer the same benefits as the hardware ones and can be created yourself for almost free. However, these are the least user-friendly storage method for cryptocurrencies.
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Provided By Tax Software Company, Sovos