How to Safely Store Your Bitcoins
One of the first things you should keep in mind when you consider storing your bitcoins on an exchange platform is that it involves quite a lot of security risks.
It goes against the very ideology of bitcoin to use middlemen and be dependent on centralized services and platforms. And even though these exchanges deal in decentralized digital currency, the platforms themselves, like banks, still represent central points of failure, which makes them incredibly vulnerable to attack.
Unfortunately for bitcoin users around the world, exchanges do not have the best of reputations when it comes to storing your digital wealth. Whenever an exchange is hacked, or the owners decide to run off with the money, there is not much that can be done, except trying to file legal action and hope the matter is investigated sooner rather than later. When you put your money in a bank, you are protected by government insurance — for example, in the U.S., the Federal Deposit Insurance Corporation (FDIC) insures your deposits up to $100,000. Not the case when it comes to bitcoin exchanges.
By storing your bitcoin on an exchange platform, you are not only trusting the service to stay online at all times — which usually will be the case, but you never know — you also rely on the platform being secure enough. To put that into perspective: You are putting your faith — and your financial wealth — in the hands of a platform that claims to use sufficient security measures in order to protect your data and money.
Luckily for the bitcoin world, exchanges have stepped up their security game in recent years, even though there is never such a thing as a bullet-proof platform. As is always the case with new and disruptive technology, it takes time to fully understand its potential and how it should be properly protected. And in the past, exchange platforms had to learn that the hard — and costly — way.
Even though bitcoin exchanges have become far more secure than they were in 2010, that doesn’t mean they should be treated as an online wallet service. Bitcoin users have plenty of options at their disposal to store BTC in a decentralized and more secure manner. That said, centralized wallets such as those provided by Blockchain.info or Coinbase.com are popular as mobile solutions.
Long story short, storing bitcoin on an exchange platform for long periods of time isn’t very secure. However, if you are planning to spend or transfer those coins within the next 48 hours, it is relatively safe to store them in the exchange wallet for the time being. Any period longer than that, and you’re putting yourself at a major risk.
The best way to store your bitcoins is on a wallet in your control, regardless of whether it is on a computer or a mobile device.
Bitcoin is designed to give end-users full control of their funds, and no one should rely on a third-party service to keep their coins safe. Transfer your funds from a bitcoin exchange or online wallet to the bitcoin wallet software on your computer or mobile device as soon as possible.