Today on the Orange Sun, we talked about Bitcoin self-custody.
One of Bitcoin’s core attributes is that it does not require financial institutions. You no longer need to keep your assets with a bank if you own crypto, and this means you have total control of your purchases and considerable responsibility for securing them.
One of the reasons why anyone should care about self-custody is because it signifies that only you possess your digital money or other digital assets. After all, you control the private key, and you are responsible for safeguarding access to your private key because it is not stored anywhere else.
There are various self-custody options, each with pros and cons. It is advisable to understand each one and choose the wallet that’s right for you. A wallet is a private key for your address on the blockchain, and that is where your assets are. A blockchain guarantees the fidelity and security of a data record and generates trust without the need for a trusted third party. There are several different self-custody wallets, which differ based on how they work and how they provide access to your digital money.
A hardware wallet, also known as a cold Wallet or cold storage, is a wallet that is not connected to the internet, which gives you control and power to store, send and receive tokens.
Hardware is separate physical devices built to store private keys and approve transactions securely. They usually look like a thumb drive or credit card. You can link a hardware wallet to a computer and use a desktop-based app to transact. Hardware wallets are known for their security because the private keys are never exposed to the internet.
Hardware wallets have a 12-24 word seed phrase that gives you control and ownership of the digital currency stored on the device.
The physical hardware wallet looks like a USB drive; if you ever lose that wallet and remember your password, you still have control of your bitcoin.
A Hot Wallet is a form of digital storage that you can access on your computer or phone and is connected to the internet. Because of the internet connection, hot wallets are not as secure from hackers as cold wallets. Put it this way: Hot wallets are for day-to-day operations, cold wallets for long-term holdings that don’t need to move frequently. It’s not recommended to put more money in a hot wallet than you would in the leather wallet you carry for fiat.
You must set up a wallet to facilitate transactions when you buy or mine a cryptocurrency. You have your private keys to access the currency stored in this wallet when ownership is transferred to you by the ecosystem. Ideally, you buy cold wallets directly from manufacturers to avoid hacks or thefts again.
Opinions expressed here are entirely that of the writer and do not necessarily reflect those of Satoshi’s Journal or Satoshi’s Entertainment Company.