Crypto Twitter had a great laugh over the last few days, when it was made known that Peter Schiff had lost his entire Bitcoin fortune. through no fault of his, mind you, because the platform had corrupted, and did not accept his password as genuine. So, in this post, let’s take a look at the basics of bitcoin storage, and how to protect your bitcoin.
To be honest, bitcoin is a lot like a hoard of cash, and you’re your own banker. If you had a bag of cash, stashed it in the desert, drew a very precise map to it, and lose the map, you’ve likely lost your cash forever, unless you go to roughly where you remembered you buried it, and got extremely lucky.
Now, there’re enough blogs out there telling you what bitcoin is, so for the sake of this post, I’m not going there, though you can read about my thoughts on bitcoin.
Bitcoin Hot Wallet vs Cold Wallet
There are two main ways in which you can store your bitcoin, although if you’re a hardcore bitcoin HODLer, then there’s really only one way. (Actually, there is a 3rd way, which is how the Winklevoss Twins store their coins, but that’s a whole other story)
A bitcoin hot wallet means you’re storing your coins on a platform that is somehow connected online or to the internet. The cons of a hot wallet are that it can be prone to hacker attacks, and the pro is that the funds are more easily accessible for use, since they’re stored online. However, when you use platforms like coinbase and other exchanges, bear in mind that you do not get to keep your own private keys. The platform will store your coins, along with your keys, in a custodial account.
There’s a popular saying in the Crypto world though… and it is “Not your keys, not your coins.”
The whole idea of a decentralised cryptocurrency is to wrest control of your finances from centralised government entities and companies that, if threatened, could potentially lose you your fortune. If an exchange is hacked, or their assets frozen by the government, you may also lose access to your bitcoin.
A cold wallet, on the other hand, is a wallet that allows you to store your crypto offline. It could be a hardware wallet like a Trezo or a Ledger Nano X, or you could use a paper or any other material to encrypt and store your private keys and seed phrase.
How the Winklevoss Twins Store their Bitcoin
The Winklevoss twins, since their very public spat with Facebook CEO Mark Zuckerberg, have bounced back in amazing fashion by becoming bitcoin billionaires, and founders of Gemini, a crypto exchange and custodian.
They detailed in their book Bitcoin Billionaires, the steps they took to secure their crypto stash, by divvying up their private keys three ways, threefold, and placing them with multiple safe deposits across the US.
They called it their reverse bank heist. Instead of emptying bank vaults, they have secured and placed a HUGE amount of value (though in parts, they are individually worthless) into multiple bank vaults.
Cool.
I personally use a Nano S to store my crpyto.
Peter Schiff
Now back to Peter Schiff, a world renowned gold bug, who’s always been against cryptocurrency and bitcoin in particular. I don’t know how much bitcoin he has stored on the platform, and how he forgot his password to it (which he vehemently denies, and claims that the platform encryption has corrupted, resulting in them not recognising his <correct> password).
If he had access to his private keys, and/or his seed phrase, he will be able to gain access to his coins.
So don’t be like Peter Schiff. Secure your assets.
Actually, be like Peter Schiff, afterall, he’s a rich old man. But, just be the rich old man part, not the bitcoin is shit part.