Best Ways to Ensure Long Term Crypto Storage
The HODL Gang
There is no shortage of malpractices in the crypto market. Plus, the amassing greed, negligence of fundamentals and other types of human errors, all contribute to the constant loss of funds. It was reported by Fortune Magazine that about 4 million Bitcoins have been lost forever. This happened because a lot of people who held bitcoin in their wallets either forgot their passwords or lost their backup phrases.
HODL, is what we in the market keep telling each other when it comes to not selling our funds. But what about storing them? How do we encourage each other to securely store our funds for time immemorial?
What if one day you suddenly feel like you want to spend the crypto you have, even if you know it might increase in value? What if you lose the device you stored the funds on? What happens if someone decides to hack your device and steal all your funds? What if you, like thousand others, realize you haven’t backed up your funds properly?
How to Store For Long Term
In essence, Cryptocurrencies are usually stored in the form of a file on their device, the so-called ‘wallet’. If this file is lost, hacked or corrupted, the coins are gone forever. And so, you should always make sure to keep good care of the funds that are stored in that file.
To ensure our readers don’t go on to face the same problems, we have compiled a list of the best ways to store your crypto securely and for a long time. Here we go.
A Hardware wallet is a physical electronic device that is designed to protect an individual’s cryptocurrency funds by securing their private keys. The idea behind hardware wallets is to separate the private keys from online methods of storage, such as a computer or smartphone, which are more susceptible to being compromised by a hacker. Storing your private keys offline prevents against this, as hackers would have to physically steal your hardware wallet and gain access to a user’s private keys.
The core innovation is that the hardware wallet must be connected to your computer, phone, or tablet before coins may be spent. Hardware wallets keep private keys separate from vulnerable, internet-connected devices. Your all-important private keys are maintained in a secure offline environment on the hardware wallet, fully protected even should the device be plugged into a malware-infected computer.
There is a huge market for hardware wallets service providers. Each wallet with specific features of their own such as a wide range of supported coins, increased factor authentication, additional flexibility and so on.
The Ledger Series hardware wallets, i.e., Nano S and Nano X, are one of the most popular and versatile hardware wallets out there. The best feature the Ledger wallets are that they are immensely more secure and trustworthy than online or Hot wallets. Cold wallets, such as Ellipal Titan offer one of the best security in terms of crypto storage.
The most basic form of cold storage is a paper wallet. A paper wallet is simply a document that has the public and private keys written on it. The document is printed from the bitcoin paper wallet tool online with an offline printer. The paper wallet or document usually has a QR code embedded on it, so that it can easily be scanned and signed to make a transaction. The drawback to this medium is that if the paper is lost, rendered illegible or destroyed, the user will never be able to access his address where his funds are.
One of the advantages of having a paper wallet is that once you transfer it, it takes more time to put it back online and withdraw than when compared to a hot wallet. That forms another layer of security as it discourages you to take out funds, because it is too much work.
Paper wallets are easy to use and provide a very high level of security. Using a paper wallet is relatively straightforward. Transferring Bitcoin or any other currency to your paper wallet is accomplished by the transfer of funds from your software wallet to the public address shown on your paper wallet. Alternatively, if you want to withdraw or spend currency, all you need to do is transfer funds from your paper wallet to your software wallet. This process, often referred to as ‘sweeping,’ can either be done manually by entering your private keys or by scanning the QR code on the paper wallet.
You can use services like Bitcoin Paper Wallet Generator to easily make a paper wallet. You can then store that paper in a safe or with your other property documents.
A Hashed Time-Locked Contract (HTLC) is traditionally a mechanism to ensure payments are made, i.e., to eliminate counterparts’ risk. HTLC’s are made by creating channels with two or more parties. Person A creates a channel, waits for person B to send the agreed-upon price, Person A approves and the contract is closed.
i.e.: If Alice has an HTLC channel open to Bob and Bob has a channel open to Charlie, Alice can use an HTLC to pay Charlie through Bob without any risk of Bob stealing the payment in transit.
But, concerning the current discussion, we can modify Time Locked Contract to our benefit.
One of the features of an HTLC is that you can customize who to send the funds to when approved, and when to send it to. And so, why not create an HTLC where both parties are the same person, and the transit of funds is me sending to myself in the future?
Say Alice creates an HTLC channel and deposits a certain amount of funds in it. Alice mentions another wallet address in the contract, specifying to send funds to that address when approved or when the contract time has passed. On the day when the contract lapses, the funds will be directly sent to the specified wallet, like clockwork.
In this case, we used an HTLC, modified and made sure our funds are locked for a period we want. Think of it as a gift to you from yourself. An HTLC ensures that your funds are secure and locked. Meaning that, unless specified, you cannot touch your funds and they will remain locked.