This article is inspired by an original version written by Arman The Parman
Securely storing bitcoin is the most important step for any Bitcoiner. In this article we explain the 8 levels of storing bitcoin in an easy-to-understand format.
Table of Contents
Level 1: Exchange Held Coins
For beginners seeking simplicity, purchasing Bitcoin from an exchange and letting the exchange store the coins is a convenient starting point for storing Bitcoin. Transition to the next level is encouraged as holdings accumulate.
Level 2: Internet-Connected Wallets
Ideal for Bitcoin beginners, internet-connected “hot wallets” provide insight into self-custody and storing Bitcoin. Experiencing transactions between the wallet and exchange offers eye-opening learning. Holding smaller amounts in this wallet is suitable. Even experienced users find mobile hot wallets handy for minor transactions and introductions to newcomers.
Level 3: Single-Key Hardware Wallet
A comprehensive guide to achieving this level ensures robust security for storing Bitcoin. Understanding the process and adhering to best practices yield excellent security. Pair hardware wallets with dedicated Bitcoin computers for transactions for optimal use.
Level 4: Node Connection
Running your own node and linking your wallet enhances privacy while storing Bitcoin. Refer to the article outlining the six reasons for running your node. Note that a new wallet, disconnected from public nodes, is required for heightened privacy benefits.
Level 5: Air-Gapped Computer Setup
Master the creation of private keys with dice on an air-gapped computer. Alternatively, follow the simplified process. Import newly generated keys into your hardware wallet instead of relying on its key generation.
Level 6: Storing Bitcoin With A Multisignature Setup
Create keys with dice as mastered in level 5 for storing Bitcoin. Multisignature wallets offer enhanced security but necessitate careful setup. Benefit from splitting key storage, spending, and creation across different locations and computers.
In a multisignature setup, a predetermined number of private keys are generated, and a specific threshold of those keys must be used to sign a transaction before it can be executed. For example, a 2-of-3 multisignature wallet requires two out of three private keys to authorize any outgoing transaction.
Level 7: Advanced Privacy
Expertise in coin mixing for privacy or understanding the Lightning Network aids in spending Bitcoin with enhanced privacy.
Level 8: Inheritance Planning
Address inheritance in your Bitcoin journey, ensuring access for beneficiaries in case of your demise while storing Bitcoin. Solutions like ParmanVault, integrating self-custody and inheritance planning, offer peace of mind.
Conclusion: The Path to Mastery
Embarking on the journey from novice to Level 8 is both challenging and rewarding, providing a secure approach to storing Bitcoin. While some may find barriers insurmountable, the process is fulfilling for those who choose to engage. Seek assistance if needed as you progress through these levels, and remember that each step brings you closer to mastering Bitcoin custodianship and effectively storing Bitcoin.