Is cold storage the best option to prevent Bitcoin from being stolen?

Even the most powerful and advanced Bitcoin exchanges can be hacked. Kraken suffered a DDoS attack that disabled Bitcoin withdrawals and froze users’ accounts for days. Earlier this year, more than 18,000 Bitcoins were stolen from the Bitstamp platform. And many Bitcoin users still rely on hot (online) wallets.

Currently, many Bitcoin wallet platforms provide additional security measures and enhanced security protocols to protect user funds. Many platforms now implement multi-signature technology, which generates more than 2 unique private keys (signatures) for the user's Bitcoin wallet, one of which is kept by the user and the rest is stored with more than 2 third parties.

However, the best way to ensure the safe storage of Bitcoin is "cold storage." Many enterprise-level users and Bitcoin investors store Bitcoin offline to avoid potential theft risks.

There are three ways to store Bitcoin offline:

1. Paper Wallet

2. Offline Bitcoin Hardware Wallet

3. USB drive wallet or print out the private key

"Paper wallet" is to print out all the data required for Bitcoin private key in the form of a file. Leading Bitcoin wallet platforms Armor and Electrum both support this method, printing multi-signature paper wallets and generating mnemonics. At the end of last year, the domestic Bitcoin wallet company "Bitinghang" launched a paper wallet printer.

The Bitcoin mobile app Mycelium also offers an easy-to-use cold storage feature that allows users to import their Bitcoin hardware wallets into an online (hot) wallet platform.

However, there are also many Bitcoin security experts who strongly oppose Bitcoin holders to use paper wallets, because once a paper wallet is lost, it is irrecoverable. Instead, many Bitcoin enthusiasts recommend using Bitcoin USB hardware wallets such as the USB wallet "Ledger Nano" launched by Ledger. USB wallets store Bitcoin wallet data in a microprocessor to avoid all types of potential attacks. USB wallets have been widely adopted by many banking financial institutions.

The Ledger team said:

“Ledger Nano is developed based on the industry standard EAL5+ smart card, which is a high-level security standard used in banking, passports, healthcare systems and government data. Neither Ledger nor third parties can know the user’s private key information, which is securely locked in your smart card device.”

Bitcoin investors can also use Xapo's Bitcoin repository service, which allows users to store Bitcoin on offline servers.

Although Bitcoin wallet platforms and exchanges can provide efficient instant transactions and payment services, storing Bitcoin in a hot (online) wallet still carries a certain degree of risk of loss. To avoid potential data leaks and hacker attacks, it is best to store Bitcoin in a cold wallet.

Original article: http://www.newsbtc.com/2015/11/29/storing-bitcoins-in-cold-storage/
By Joseph Young
Translator: Bibit
Editor: printemps
Source (translation): Babbitt Information (http://www.8btc.com/bitcoin-cold-storage ‎)