Bitcoin is a digital currency that follows the peer-to-peer method and is decentralized in nature, eliminating the need for intermediaries to complete the transactions. Decentralized currency means two parties can deal and make transactions without the requirement of the government or banks. People are given complete freedom to send and receive money from anywhere in the world. The elimination of government and banks also gives users the responsibility to protect their digital tokens from unauthorized access and fraud. The developers are making changes and are overcoming the negative factors of the bitcoin network.
Beginners might not know, but Bitcoin are digital tokens, and therefore they can never be stored physically. The digital tokens can only be stored on cloud storage, and therefore digital wallets have been developed. A digital wallet is a program that digitally stores the bitcoin and enables users to easily send and receive bitcoin to any part of the world. Because these are digital wallets, these are more vulnerable to cyber-attacks, and therefore it is crucial to protect them carefully.
Storage Of Cryptocurrencies
Cryptocurrencies are similar to traditional currencies in many terms, but the main difference is that cryptocurrencies are decentralized in nature. No third parties are involved in the bitcoin network, making it easy and fast to complete the bitcoin transactions. Cryptocurrencies provide full control to users over their funds. Like the valuable assets are required to be stored carefully, and no one will prefer to leave cash or gold for theft, and in the same way, users must protect their cryptocurrency by storing them carefully.
The main step that users need to take is to choose the right and secure wallet to store their crypto tokens. You might be unaware of the various types of digital wallets available so that we will learn just check here in this article.
Four Types Of Wallets To Store Cryptocurrencies
1. Paper Wallets
One of the main options to store bitcoin away from the internet is paper wallets. It is quite easy to generate a paper wallet, and this can be done by using a printer and paper. It consists of QR codes, and one QR code is used to make deposits while another one stores the bitcoin wallet's private key. Users can easily send and receive funds to their wallet by scanning the QR code.
It is crucial to store paper wallets at secured locations because papers are more vulnerable to floods, fire, and other natural calamities and theft.
2. Hardware Wallets
Users who want to store their digital tokens away from the internet must use hardware wallets. Hardware wallets are more like physical devices that store the private keys offline and provide great security to digital tokens and prevent unauthorized access. It is best to store bitcoins in hardware wallets because it is easy to create back up of hardware wallets. If the hardware wallet is stolen, lost, or damaged, the user can easily access the bitcoin wallet through backup.
3. Custodial Wallets
Custodial wallets are the wallets where access to your digital tokens is given to third parties. The custodial wallets are easy to understand through the example of users that store, send, and receive their bitcoins through cryptocurrency exchanges. Users provide control to exchanges to protect their wallets. In reality, custodial wallets are the riskiest wallets to store bitcoins because the third party has access to your coins, and there are more risks and cases where fraudsters and hackers target exchanges.
4. Non-Custodial Wallets
As compared to custodial wallets, non-custodial wallets are a much better option to store your digital tokens. Unlike custodial wallets, no third party is given access to your coins, and only the users have access to their wallets and private keys. The non-custodial wallets provide an intuitive user interface to users to control and transfer their bitcoins. Nowadays, users can easily backup their non-custodial wallets and can secure their digital tokens. Users must take complete benefit of cloud backups and must back up their wallets at different places.
The Bottom Line Of Bitcoin Storage
The bitcoins are similar to fiat currencies when we talk about storage, and it is important to take essential precautions to secure your coins. BTC crypto wallet users must never share their passwords for any other use and must use a unique password to prevent unauthorized access.
