Cryptocurrency exchanges are convenient places to keep the Bitcoin that you have purchased. However, they come with a significant risk which is often not understood by users. Exchanges pool all their users Bitcoin together and essentially provide IOU’s back to them, as a representation of the Bitcoin that each customer has on deposit with them. This should not be mistaken for Bitcoin actually held in your own self-custody wallet. Bitcoin held on an exchange is at risk of being lost, hacked or confiscated as the exchange has control over your Bitcoin, you simply have an IOU and require the exchange to act in order to send your Bitcoin wherever you would like it to go. This is what is known as counterparty risk. To avoid this risk entirely, move your Bitcoin off the exchange into a wallet that you control the private keys too. Wallets such as BlueWallet, Samourai, Aqua, Blockstream Green and Sparrow are all examples of self-custodial wallets you can use to fully control your own Bitcoin. You may have heard the term: “Not your keys, not your coins” before. This means that if somebody else is controlling the private keys to your Bitcoin (like and exchange) the coins are not actually yours at all. If you have any Bitcoin held on an exchange today, move it off as soon as possible. Exchange hacks happen all the time.

Yes. Today. Over 50 individual exchange hacks have taken place since 2012 and over $2.8 billion has been stolen. It’s a matter of when, not if, it happens to your exchange.

Here is a list of all the exchanges that have been hacked, up till last year.

As mentioned in the previous FAQs, storing your Bitcoin on an exchange is uniquely risky due to the counter party risk involved. However, holding your Bitcoin in a self custody wallet comes with its out suite of risks. In our opinion however, these are far less than those associated with an exchange. 

The biggest risk you face in self custody is that you lose access to your 12 or 24 seed words. To deal with this risk, we suggest that you make multiple copies of your seed words and protect them with a passphrase as an additional layer of security. Furthermore, we suggest engraving your seed words onto steel backup plates. Kits for doing so are available in our store. 

Simply put, a multisig (multiple signature) wallet is a combination of multiple single signature wallets. It requires multiple of these single sig wallets to sign a transaction in order to broadcast it to the Bitcoin network. For example, a 2 of 3 multisig wallet is made up of a total of 3 individual keys (single sig wallets) of which any 2 are required in order to broadcast a transaction. This means that redundancy is built into the multisig wallet, as only 2 of the 3 possible keys are required. This increases security of the wallet and allows responsibility to be split between multiple users, thus reducing single points of failure.

Unless you are an organization we would suggest that you do not require a multisig wallet. The reason for this is that the additional complexity involved with a multisig can lead to the loss of your Bitcoin if you are not familiar with what you are doing. Utilizing a single sig wallet with a passphrase can give you multisig levels of security, without the additional complexity risk. 

However, if you are an organization that requires multiple parties to hold keys and remove single points of failure, then we would recommend that you use a multisig wallet.

This depends on your budget and security concerns. However, we recommend that you purchase a hardware wallet which supports Bitcoin only, rather than a host of other cryptocurrencies. The reason for this is simple: If a wallet supports multiple cryptocurrencies, the developers have to split their time and efforts towards maintaining the security considerations of each of these coins. This results in worse security for Bitcoin held on the wallet as their efforts are diverted. 

Coldcard, Blockstream Jade and Seedsigner are all great Bitcoin only options. All three have open source code bases, so that interested parties can inspect to the code to be sure that nothing dodgy is happening in the code base.

If you are an individual looking to secure your Bitcoin stack, 95% of the time a single sig + passphrase wallet will be secure enough. In practical terms, this would be a hardware wallet such as a seedsigner, Jade or Coldcard protected with a passphrase. The passphrase acts as a second layer of security, which means that should anyone gain unauthorised access to your seed words, they still cannot move or even view your Bitcoin without the passphrase.