The key to using Bitcoin - or any cryptocurrency for that matter - as a means of buying and selling is storage. The equivalent of storage in a fiat currency scenario can be anything from a bank account to a piggy bank tucked away in the corner of your closet. You have to have something to store your physical bills and coins in until you are ready to spend them. Cryptocurrency is no different.
What makes crypto so challenging is that there are no physical coins or bills. In fact, there is nothing tangible at all. Bitcoin exists as computer code. Individual coins exist only as digits contained within that code. Transactions are maintained on an immutable blockchain ledger distributed on a large number of computer nodes located around the world.
So if there is nothing tangible to hold on to, why is storage so necessary? If there are no physical coins to spend on casino games, why do you need secure storage? Because storage determines real ownership. The bitcoins you hold in storage are the coins you own. Lose that storage and you lose your coins. It is that simple.
The three most common means of storing digital coins are:
- Software Wallet - A software wallet is nothing more than a computer program or file that keeps track of your coins, unique addresses, and transaction data. It can be stored in the cloud, on a desktop computer, or even on a mobile device.
- Hardware Wallet - Hardware wallets are essentially hard storage devices. They can include flash drives, hard drives, and even SD cards.
- Paper Wallets - For those who do not mind the work, paper wallets are yet another option. A paper wallet is simply a printed copy of the digital information associated with every crypto transaction. You could write the information in a notebook or print out copies of your transactions on your computer printer.
There really is no one way to store cryptocurrency information. You are limited only by your imagination. As evidence, consider some of the less conventional means of Bitcoin storage discussed below. All of these methods are absolutely real, albeit somewhat questionable.
1. Multi-Signature Wallets
A multi-signature wallet can be either hardware- or software-based. Its key feature is that it requires the permission and endorsement of several users before any transactions can take place. This kind of wallet is more secure for obvious reasons. However, it can also be quite problematic.
Let's say three signatories are involved in a multi-signature wallet. Two of those individuals keep their information stored on a hardware device with multiple backups, all stored in safe deposit boxes. The third signatory keeps his records via a paper ledger at home. What if a fire destroys the third individual's home? All three could be out of luck.
Multi-signature wallets are not typically used for small amounts of crypto or for consumer transactions. Rather, they are the domain of corporate cryptocurrency accounts dealing with large-scale transactions. As such, the scenario we described is unlikely to happen.
2. Tattoo Seed Storage
Not all storage of your cryptocurrency assets has to include every piece of information. In fact, you can store just the seeds in a separate environment while keeping everything else in your digital wallet. Without the seeds, your wallet would be useless to anyone who got their hands on it. A rather bizarre but effective way to store just your seeds is with tattoos.
Though rare, there have been crypto investors known to tattoo seeds on their bodies. Whether they have an entire seed inked on an arm or leg, or just a unique phrase or image that causes them to remember that seed, there is very little risk of losing the seed once it has been inked.
For the record, a seed in cryptocurrency lingo is just a private key. Every transaction with crypto requires both a public and private key to complete. Only the coin owner has the private key; the public key is published across the network so that recipients can actually receive their coins.
Though tattooing seeds on your body is possible, there are some limits to its practicality. First of all, getting inked is time-consuming and costly. Second, experts recommend using multiple private keys in order to keep transactions separate. The more keys you have, the more tattoos you will need. This may explain why tattoo seed storage is not all that popular.
3. Bank Storage
Storing your bitcoins in the bank can be accomplished through either a paper or hardware wallet. Let's say you use a USB flash drive as a hard storage solution. Rather than keeping that hard drive at home or the office where it could potentially be lost, stolen, or destroyed in a fire, you store the drive in a safe deposit box at the bank. It is safe there.
Safe deposit boxes are built-in to bank safes for security purposes. That makes whatever is in them as safe as the bills and coins also stored in the safe. Your flash drive is protected against fire, theft, flood, and other dangers.
This may sound like the perfect solution until you realize how inconvenient it is to retrieve a flash drive every time you want to conduct business. But you could do something similar to getting inked: store just your seeds on the flash drive. Keep a second copy on your desktop computer or mobile device so that you can conduct regular transactions. In this kind of scenario, the bank storage acts as a backup just in case your computer or mobile device goes down.
4. Physical Coins Storage
Although Bitcoin itself does not issue physical coins or bills, there are companies that mint display coins representing Bitcoin holdings. Attached to these physical coins are stickers, or some other physical marker, containing pertinent BTC information. Some companies issue coins that represent each of Bitcoin's main denominations with the idea being to represent value equally.
This method of storage is not highly endorsed due to its high level of insecurity. Just like anyone can easily steal fiat bills and coins from unsuspecting consumers, physical coins representing Bitcoin storage can be taken without much effort.
On the plus side, you can still buy physical coins as show pieces without attaching any information to them. Just store your real coins by some other means. That's a different topic for another post, though.
5. Stenography Storage
Last but not least is storing your coins through the use of stenography. Most of us know stenography as a means of recording data by way of shorthand. A stenographer in a court of law uses a special kind of machine and specialized shorthand to record all the happenings in the courtroom. That recorded data is then transcribed into standard text at a later date.
In a cryptocurrency scenario, the use of stenography is slightly different. Rather than using a type of shorthand to record data, stenography involves embedding digital wallet information into some other form in such a way as to make it indecipherable to anyone but the owner. For example, you could embed the information in the painting hung in your wall.
Let's say you are a hobby artist with a fondness for painting trains. You could store some of your seeds on painted train cars by making the information appear as numbers and symbols on the sides of those cars. No one would know what they meant but you.
Do you like to cook? You could store digital wallet information in your recipe book by attaching information to a legitimate recipe or making up a fake recipe just for that purpose. No one but you would understand what it meant. And for the record, your recipe book could be paper or digital.
The obvious downside to these sorts of things is the risk of loss. A painting on the wall is only secure until someone steals it. While the embedded information would mean nothing to the thief, you are still out of coin because you do not have access to the painting anymore.
Unconventional for a reason
It should be obvious that we do not endorse any of the less conventional means of cryptocurrency storage described in this post. We offer them simply as an illustration to prove that there is more than one way to store your coins. But know that all of these unconventional methods are considered as such for a reason. They are less secure, unreliable, and generally work as backup storage only.
Whether you have invested in Bitcoin just to play Mega Moolah online or you look at Bitcoin as an investment tool, you should take storage seriously. As such, you should use one of the recommended storage solutions found at the start of this post.
We recommend a combination of hot and cold storage with a number of backups for redundancy. We also advise that security be a priority. Remember that cryptocurrency transactions are immutable. If someone steals your coin, it is stolen. If you lose your wallet or your private keys, your coin is lost for good.