Cold Wallet

These are encrypted devices, they may take the shape of a small computer or USB stick and are specifically designed in ways that keep your private keys safely secured inside of it.

You will need to note the seed phrase when you use these for the first time in case you lose the USB stick or the physical device becomes damaged. As long as you have the seed phrase/backup phrase stored securely you can always restore the wallet to a new device or several devices if and when you need to access your funds 

Companies like Ledger and Trezor supply these but make sure you buy from the manufacturer directly.

A lower budget solution to hardware wallets where your public address and private key are simply printed off on a sheet of paper. If you wanted to receive funds then you manually type out the public address from the sheet of paper. 

To create a paper wallet, search for “Bitcoin paper wallet generator” online and take your pick. Wallet Generator and BitAddress seem to be popular – open their page up, disconnect your internet and follow the instructions.

As your wealth in bitcoin continues to grow, it’s a wise choice not to leave it on an exchange where you have a bitcoin IOU, and you’re taking on third party risk. Getting used to managing your keys is the first part of your bitcoin journey to self-sovereignty, as we say in bitcoin, “not your keys, not your coins”.

Hot wallets provide an excellent training ground, getting you used to manage your transactions and what it feels like to take custody of your funds. However, hot wallets have specific security issues that are more attractive to expose the more wealth is kept in these wallets.

This is why a hardware wallet is such an essential step as your wealth increases; you don’t want to store your life savings in a method that encourages hackers to persue it and to compromise your security as your wealth grows. You want to give yourself the best level of protection money can buy.

A hardware wallet offers you a unique device that can ONLY be used to manage your bitcoin, meaning less chance of software corruption and issues that can open up the device to others. A hardware wallet also allows you to keep your keys away from an internet connection and is also a great way to force security measures on yourself, as we can all get lazy or complacent at times.

Once you have a hardware wallet of your choice, it’s up to you to check a few things when setting up; the first would be to review online feedback from other users, have had a good or bad experience with the technology and explore potential issues and if they are a make or break for you. 

Wallet hardware and software review

Find out how you can authenticate the device and ensure it was not tampered with; if the manufacturer cannot provide you with a solution on how to authenticate a device, you should not use it. Since the device could have been opened and back doors added to the device to access your keys. 

Device secrecy 

Ensure that no one knows you have a hardware wallet as far as possible; if people know you have one, they’ll know what to look for and could try to steal your device. If your keys are kept separately to your wallet, it would simply be an annoyance, and you would need to get a new device, but if they get a hold of your keys, it’s bye by bitcoin. 

Private key management 

As mentioned, your private key is of utmost importance. Ensure you keep your recovery seed safe: Every wallet has a recovery seed, which you can use to restore your keys if you wipe your device or if you lose it and get a new one. You should keep a safe copy of this recovery seed someplace safe, preferably not in your cloud or disk drive.

When you do generate a set of offline keys, DO NOT put them on an online device. Don’t save your keys in an online document, email, text file, word document or any digital device that has access to the internet. Do not take any photos of your private keys, and make sure it is only available offline. Any digital copy of your keys is a potential attack vector you create for yourself. 

Finally, regarding keys, you should always have copies and try to create a copy on something more robust than paper, like a metal storage device to protect you against fires or any damage to your seed phrase. 

When generating bitcoin public addresses from your wallet

Always check addresses before confirming transactions: Even though malicious actors can’t remotely hack the hardware wallets that sign bitcoin transactions, they can still use other methods to trick you out of your bitcoins. For instance, some cryptocurrency malware modifies the bitcoin addresses you copy into your clipboard. 

So, while you think you are copying the bitcoin address of a friend into your wallet, you might end up with an unknown address that belongs to a hacker. First, make sure the source of the address is legitimate. Also, always double- and triple-check the address before confirming any transaction. 

You should check every single character in the address, but some tend to try to shortcut by comparing the first and last four letters in the site you got the address from (eCommerce website, email, etc.), your software wallet, and your hardware wallet display (if it has one), should be enough.

If it’s a small transaction, however, larger bitcoin transactions, you should ensure that you review your wallet address thoroughly.