![]() ![]() (Some people still argue a hardware wallet isn’t as safe as paper, since they have software on them.) When you plug in a hardware wallet to your computer, it forces you to enter your pin before you can do anything, and you also have to know your bitcoin wallet address to send or receive any funds, so there are multiple layers of safety. There are a number of hardware wallets on the market now, including KeepKey, Trezor, and Ledger. ![]() has a handy guide to creating a “paper wallet” file on your computer that isn’t accessible to the internet.Īnother form of cold storage is a “hardware wallet,” which are fobs that plug into your computer through the USB port. You could also write or etch your keys onto a physical object (like a commemorative coin), or save them in a word document on an external hard drive that is not connected to the cloud. Yes, there is an obvious irony to the notion that the safest way to protect your digital asset is using plain dead-tree paper. In fact, Coinbase says it stores 98% of customer funds, using paper backups of the keys that are “distributed geographically to safe deposit boxes.” Sound elaborate? It is, because it has to be in order to protect the coins from thieves.īut the purest form of cold storage is writing down the keys on a piece of paper somewhere safe, and doing it yourself, rather than trusting Coinbase to do it. If you do so, the funds are not as instantly accessible to you on the site to sell or transfer, but they are safer-Coinbase is keeping your keys somewhere offline using its own chosen method. ![]() When you create a wallet on Coinbase, it gives you the option to “vault” the wallet. (In other words, not “hot.”) Cold storage by Coinbase and other exchangesĬoinbase can do its own cold storage of your coins, if you ask it to. The safest way to store your coins is through “cold storage”: keeping the access keys somewhere offline, not accessible to the Internet in any way. Bitcoin theft is a major problem: in 2016, $28 million in losses due to cryptocurrency crime were reported to the FBI, triple the amount in 2015. If someone gets into your Coinbase account and gets access to your phone, they can take your coins, and you’re powerless to stop it. But that also means they’re more vulnerable to a hack. Your coins are on a wallet that lives on Coinbase, and the funds are instantly accessible to you when you log in. If you bought bitcoin there and then did nothing else, you are allowing Coinbase to be the custodian of your coins. Let’s say you bought bitcoin on Coinbase, the most mainstream website for buying bitcoin. ![]()
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