This series is sponsored by Block Rewards, a Kelowna-based company that is focused on solutions for Canadian employers to integrate Bitcoin into their compensation, benefits, and retirement savings plan strategies.
In this episode of The Bitcoin Show, host Jim Csek from NowMedia spoke with Scott Dedels, CEO of Block Rewards, about how cryptocurrency is stored and the various ways of doing so.
Dedels began the episode by quickly explaining how a Bitcoin transaction works, with more details available in a previous article at this link.
The main difference between a traditional transaction and one using Bitcoin is the use of a middle person – with Bitcoin using a “peer-to-peer” model.
“With bitcoin, it really eliminates all of those middlemen and this is where the sort of base of bitcoin or the idea where it was born is this peer-to-peer money, where there is no middleman along the way for the ride,” said Dedels.
After a recap of Bitcoin transactions, the duo discussed public and private cryptocurrency keys.
A public key allows users to receive cryptocurrency transactions and is available for anyone in the system, while a private key proves ownership of the respective public key and is kept secret.
Dedels dived into the world of cryptocurrency wallets, explaining the differences between three different forms of storage.
The first type of storage is known as a hot wallet and it is always connected to the internet and a crypto network.
The hot wallets are convenient when being used for day-to-day transactions but are more vulnerable to online attacks.
Another type of storage is a cold wallet, which is not connected to the internet or a crypto network.
The cold wallet has a higher level of security but can be inconvenient for day-to-day transactions.
The third and final form of storage is a custodial wallet, which is run by a third party that stores the crypto for you.
A custodial wallet could be either online or offline and is a convenient option, but includes the risk of trusting a third party to manage the funds.
The duo then looked at various wallets Dedels recommended.
Click the above video for a deeper dive into cryptocurrency storage.