Even the most robust and advanced platforms suffer from hacking attacks. DDoS attacks targeted at Kraken disabled bitcoin withdrawals and froze user accounts for days. More than 18,000 bitcoins were stolen from European bitcoin exchange Bitstamp earlier this year. Still, many bitcoin users rely on hot (online) wallets.
Today, many bitcoin wallet platforms provide additional security measures and enhanced security protocols to protect user funds. Bitcoin wallet users could also implement the multi-signature technology, which distributes unique private keys (signatures) to more than two individuals.
However, the best practice of keeping bitcoins is in a cold storage. Also known as Deep cold storage, many institutional clients and high profile bitcoin investors store a reserve of bitcoins offline, eliminating the potential of theft or a robbery.
There are several methods of keeping bitcoins offline:
- Paper wallet
- offline bitcoin hardware wallet
- USB Drive or printed out private key
Paper wallet is a document which holds all of the data needed to generate any number of bitcoin private keys. Leading bitcoin wallet platforms including Armory and Electrum support generating mnemonic codes for their wallets that can be printed to make a multi-key paper wallet.
Bitcoin mobile applications such as Mycelium also provide an easy to use cold storage spending function,