Unlike traditional currencies, Bitcoins are quite different. You get a wallet that can be used to store bitcoin. You must have heard many financial advisors say that you should not keep all your bitcoins in a single wallet. Well, there are reasons behind this advice given by advisors. In this article, we will look into the depth of the topic and try to unravel the best ways to store bitcoins.
Are you excited? Let’s begin!
Why Should You Not Keep All Bitcoins in a Single Wallet?
The Blockchain Shows All
Although people say that bitcoin transactions are anonymous, the concept is not entirely true. The Blockchain technology can easily see the whale investors as they keep on doing bigger transactions in Bitcoins. Blockchain technology also reveals these transactions to people who have the time to explore them.
No doubt the identity of the bitcoin holder remains encrypted, the activity in a particular wallet is easily available. Keeping different wallets that can have a certain number of bitcoins can be an easy way to prevent these watchful activities. Scrutiny and watchful activity is not a bad thing, but it becomes stressful when you are guaranteed anonymity and privacy by the makers of starofmysore.com
Private Key is at Risk
Even if you are not worried about the hacking activity, different ways can lead to the loss of Bitcoins and you can lose access to your bitcoin wallet. If you are investing in Bitcoins, you might be knowing that losing the private key of your bitcoin wallet is almost similar to losing bitcoins stored in your wallet. Once you lose the private key of your bitcoin wallet, there is no way possible that you will be able to recover the key. This is the reason investors are asked to keep their bitcoin wallets safe and secure.
This is another major reason why advisors ask people to diversify their bitcoin storage. If you use different Bitcoin wallets, you will diversify the storage. Even if you lose a private key to one wallet, you won’t lose all bitcoins. Thus, diversifying the bitcoin into different wallets can be one of the best ways of risk management. It can also help you to enhance your privacy. In addition to this, smaller transactions won’t garner much attention and you will be able to keep bitcoins safely.
What Can be Done?
If you are worried about how to diversify the storage of bitcoins, one of the best ways is to know about the different types of bitcoin wallets. Knowing about the types of the wallet will help you to make the perfect choice in terms of choosing wallets.
There are two major types of Bitcoin wallets.
The Cold Storage Wallet
This is a type of Bitcoin wallet that is not directly connected to the internet. Thus, you won’t face any security issues or cybersecurity attacks if you use the cold storage wallet. Some of the best examples of cold storage wallets include the desktop, flash drive, and paper wallet. The only thing that you need to take care of while using the cold storage wallet is to take care of the private key that will enable you to get access to the bitcoin wallet.
The biggest reason people use cold storage wallets is because of the level of safety and security offered. Users don’t have to worry about the risk of hacking and spamming when they are using the cold storage wallet for bitcoin storage.
Hot Storage Wallet
The hot storage wallets are named so because they are connected to the internet. Some of the examples of hot wallets include the mobile wallet and the web wallet. The best part about a hot storage wallet is that it can be used anytime anywhere you want. Thus, in terms of efficiency of use, hot storage wallets offer the best efficiency.
After getting to know all about bitcoin wallet, you can make the best choice. Different types of wallets offer different advantages and disadvantages. So, choose the wallet that can help you get maximum benefits. Let us know if you want to know more about bitcoin wallets and why you need to diversify the bitcoin storage.