How do you store Bitcoin once you’ve purchased it? It has to live somewhere safe. My old, stinky leather wallet sure doesn’t seem like it’s going to work. So what gives?
When I first purchased Bitcoin, I stored it in a custodial exchange wallet for months before realizing it was a bad idea, purchasing a Ledger Nano S and transferring my holdings over for uber-max security.
Tip #1 – Buy a Ledger Nano
These little hardware wallets make it virtually impossible for a hacker to steal your keys (and your coins). Investing in a Ledger Nano before buying any cryptocurrency is the smartest thing you can do. It’s like buying a safe for your most valuable items before moving them into your house.
Tip #2 – Do not store your Bitcoin on an exchange – ever!
Cryptocurrency exchanges disappear or change their rules regularly. It’s an unfortunate part of the industry. Trusting any third-party with the custody of my coins is a no go after CryptoBridge (a former cryptocurrency exchange) withheld my balance due to new KYC rules and shortly thereafter closed their doors.
Store your coins offline, in a wallet that you are the sole owner of (hello, Ledger Nano!). You should be the only one with the keys to this wallet. The coins should only leave your wallet if being used to trade, make a purchase or interact with a decentralized application.
Tip #3 – Encrypt Your Wallet and Back Your Keys Up
One of the scariest pitfalls of cryptocurrency is losing your coins. It’s estimated that 20% of all Bitcoin is completely lost, unrecoverable and never to be seen again. That’s around… $28,900,000,000!?!
Don’t let that stop you from encrypting your wallet, because you really need to protect yourself from hackers. They only need to grab one file to gain access to an unlocked wallet. Here’s what I recommend:
- Encrypt your wallet with a strong passphrase
- Write your passphrase down on a piece of paper (do not save digitally)
- Make duplicates of your passphrase
- Store your passphrase backups in multiple secure locations
If you purchased a Ledger Nano to store your Bitcoin, you’re in luck! The process of securing a backing up your wallet is made simple with a little wizard during setup.