Thread by @JohnCantrell97

If you’ve done any research into Bitcoin you’ve heard people talk about private key storage.

What are keys?
What’s the difference between hot and cold storage?
Which should I use?

Keys are one of the most important topics in Bitcoin. Let me break it down for you 👇

To understand keys you need to know a little bit about cryptography.

Keys generally come as a pair of public and private keys.

The most common use of keys is to encrypt and decrypt messages.

However, in Bitcoin they are primarily used to generate and verify signatures.

In order to spend Bitcoin you need to produce a signature by signing every tx you make in order to prove to the network that you control the UTXOs being spent.

You use your private keys to produce this signature.

If you need a refresher on UTXOs:

https://twitter.com/JohnCantrell97/status/1480979605414723585

Ok so why do we need to store them?

Well, if you ever want to be able to create a transaction that moves your Bitcoin then you will need your keys.

Without your keys your Bitcoin is locked forever. There is no forgot password flow and no admin that can reset your password.

Ok got it, I need to store my keys safely if I want to use my Bitcoin. What’s the difference between hot and cold storage?

The terms largely refer to whether or not your keys have ever been stored on a device that is connected (or will be connected) to the internet.

If you store your keys so they will never be connected to the internet then we call that cold storage. Examples are writing them on a piece of paper, stamping them into steel, or my personal favorite @COLDCARDwallet .

If it connects to the internet then it’s a hot wallet.

What you should use largely depends on your comfort level, your risk tolerance, and the amount of Bitcoin being stored.

For smaller amounts it’s likely fine to use a hot wallet on your phone. For larger amounts you likely want to move them into some form of cold storage.

Why is it dangerous to store your keys on a device connected to the internet?

It comes down to the fact that securing a device like your laptop or phone is incredibly difficult.

Security has improved over time but it’s hard to be sure your devices aren’t compromised.

If the device you store your keys on is compromised AND connected to the internet then the attacker will be able to take your keys and along with it your coins.

Humans have been securing things in the physical world for thousands of years, not so much in the digital world.

There are lots of ways to set up cold storage which I’ll detail in future thread. A solid starter setup imo is to use a coldcard hardware device with a steel backup.

Using steel is important to protect against water, fire, acid, etc which all can easily destroy a paper backup

I hope this helped you understand some basics about private keys and different ways to store them.

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