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A simple guide to storing your cryptocurrency safely
This series is sponsored by Block rewards, a Kelowna-based company that focuses on solutions for Canadian employers to integrate Bitcoin into their compensation strategies, benefits and retirement savings plans.
In this episode of The Bitcoin Show, host Jim Csek of NowMedia spoke with Scott Dedels, CEO of Block rewardsabout how cryptocurrency is stored and the various ways to do so.
Dedels began the episode by quickly explaining how a Bitcoin transaction works, with more details available in a previous article article at this link.
The main difference between a traditional transaction and one using Bitcoin is the use of an intermediary, with Bitcoin using a “peer-to-peer” model.
“With Bitcoin, you really eliminate all those middlemen and that’s where the sort of basis of Bitcoin or the idea that it came from is this peer-to-peer money, where there are no middlemen along the way.” Dedels said.
After a summary of Bitcoin transactions, the two discussed public and private cryptocurrency keys.
A public key allows users to receive cryptocurrency transactions and is available to anyone in the system, while a private key proves ownership of the respective public key and is kept secret.
Dedels dived into the world of cryptocurrency wallets, explaining the differences between three different forms of storage.
The first type of storage is known as a hot wallet and is always connected to the Internet and a cryptographic network.
Hot wallets are convenient when used for everyday transactions, but they are more vulnerable to online attacks.
Another type of storage is cold wallet, which is not connected to the Internet or a cryptographic network.
Cold wallet has a higher level of security but can be inconvenient for everyday transactions.
The third and final form of storage is a custodial wallet, operated by a third party who stores the cryptocurrency for you.
A custodial wallet can be online or offline and is a convenient option, but comes with the risk of outsourcing the management of your funds.
The two then examined the various portfolios recommended by Dedels.
Click the video above for an in-depth look at cryptocurrency storage.