Let’s start by defining the difference between hot and cold storage:
- Hot storage: if private keys are exposed to the Internet during portfolio generation and transaction initiation.
- Cold storage: if private keys are not exposed to the Internet during portfolio generation and transaction initiation.
Hardware wallet storage: One of the first steps that you can take to secure your Bitcoin wallet is to use cold storage aka storing your Bitcoin keys in a hardware wallet. This is also called the offline method since it does not require a link to the internet. This option is not as prone to hacking.
Creating backups of your wallet: Experts are in favor of creating backups to stay safe in the event of device or data loss. You must back up your entire Bitcoin wallet to protect against hardware failures and human errors. This includes bitcoins stored in cold storage and small amount kept for trading purposes. You can also recover a stolen wallet if it is encrypted.
Encrypting the Bitcoin wallet: Encrypting your Bitcoin wallet adds an extra layer of security. The wallet can be encrypted using a passphrase. The passphrase allows you to lock your coins so it becomes difficult for the hacker to take anything unless he knows your passphrase.
Strong password: All your password should be very strong. Include everything from capital letters to numbers and special characters.
Don’t forget your password: Never forget your password, otherwise it will be very difficult to recover your lost funds. Bitcoin offers very little chance of password recovery, not to say impossible. So, memorize it.
Multi-signature: Multi-signature is one of the essential steps to ensure the security of your Bitcoin wallet. Now what is it? Well, it’s a process in which a given transaction has to get approval, for example, from three to five people.