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Op Ed: HODLing Bitcoin? Cold Storage Is Worth the Extra Effort

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Bitcoin’s popularity is growing among institutions and private investors alike as they better understand its value proposition as a store of value and as a means for censorship-resistant payments. As the value of bitcoin is progressing steadily to the status of digital gold, it also becomes a honeypot for hackers and attackers. Due to the digital nature of bitcoin, its security concerns are not well understood by most of its buyers. 

Over the years, millions of bitcoins have been lost due to poor and negligent management of Bitcoin private keys. Theoretically, this further increases the scarcity of bitcoin, since those bitcoins are inherently lost forever. However, we presume no one wants to contribute to bitcoin’s scarcity at their expense. Investors are seeking reliable and easy-to-use solutions to store their digital gold over a long span of years, without worrying they will get lost, hacked or stolen. That’s why, in this article, we will explore the concept of cold storage, an increasingly popular method to hold your bitcoins.  

What Is Cold Storage?

Bitcoin cold storage is the term used to designate an operational security system intended for long-term and offline bitcoin holdings. Generally, it’s used for amounts with substantial value and is considered as the safest way to store bitcoins. The opposite of this kind of system are hot wallets where the funds are stored online and are constantly exposed to threats such as hacks.  

Plenty of solutions and products are emerging and thriving on the market for acquiring bitcoins, storing them and spending them. An individual may amass bitcoins for lots of different reasons. One may only be interested in it for its speculation aspect and be completely indifferent for its most popular ethos, such as privacy and sovereignty. No matter the reason, the investor that plans to hold onto their bitcoin stash for a relatively long period of time must consider more advanced solutions regarding their security.

Custodial or Noncustodial Storage?

At that point, the investor will face the choice of using custodial services or creating his own personalized solution. Many bitcoiners will be tempted to choose custodians to hold their coins on their behalf. Being used to bank accounts and centralized platforms to hold their cash and other investments, newcomers to bitcoin will naturally lean toward custodial solutions. 

However, this approach doesn’t respect one of the most famous adages in the Bitcoin world: “Be your own bank.” This expression, no matter how cool and inspirational it sounds, is somewhat difficult to follow. Turns out that being your own bank puts an enormous responsibility in the hands of the owner with regards to the security of their funds and their own personal security.

Some properties of Bitcoin, such as censorship-resistance, privacy and sovereignty, are completely put aside when one chooses to employ custodial solutions. By giving the rights to your keys to a third party, you’re giving over full control of your coins. This is highly undesirable in a context of adversity. 

It also creates an enormous principal-agent problem. The custodian (the agent) overseeing the client’s funds, may be tempted to use the bitcoins in ways that wouldn’t benefit the client (the principal). Since the funds are held in one place, it also creates a big and possibly easier target for malicious actors to attack.

Some companies are proposing in-between solutions, where the company is partly responsible for the user’s security and funds. This can be done with different multisignature schemes, where some of the keys necessary to access the bitcoins will be held by the company and others by the client. This type of security setup leaves more control to the user but still compromises the user privacy and sovereignty.

So Why Use Bitcoin Cold Storage?

If you’re interested in reaching the maximum possible security for your bitcoins without compromising on its core values, cold storage is the way to go. Once your funds are in cold storage mode, they can stay put for a very long time. Of equal importance, your keys remain entirely in your possession and control. 

Still, there are some trade-offs, primarily when it comes to the effort investors must invest if they are going to assume total control of their wealth safely and responsibly.

Best Practices of Bitcoin Cold Storage

There is a saying in the operational security world that must be understood by everyone undertaking a personal responsibility concerning their security setup: No solution is perfect! You can only strive to constantly refine your solution by understanding your needs and your limits. Cold storage also comes with a non-negligible cost, considering the hardware you will need to acquire and the time you will need to set aside to master the different techniques.

If you need help to set it up, there are plenty of resources online and you can also try to meet some of your local Bitcoin community members to see if there are more suitable trusted experts that can guide you in the process. You must also remember that cold storage solutions are intended for long-term holdings, which means it can be a tedious and longer process to recuperate your bitcoins once you want to move them. Below are some core concepts of cold storage.

Offline Key Storage

Your private keys are the most important part of your setup. In a cold storage setup, your keys will always remain offline, that being part of the “cold” nature of your security setup. There are many potential risks regarding the theft of your keys when you generate them or store them on a computer that connects to the internet.

Air-Gapped and Non-Backdoored Hardware

Air-gapped computers can be called as such when they have never been connected to the internet or other networks that you don’t control. Once you dedicate a computer to being air gapped, it is important to quarantine it forever. This means that even when you’re done generating the keys for your cold storage the right way, you should never connect it to the internet ever again. Even if you wipe the device clean by deleting everything on it, some traces of data could remain on the computer and be accessed by a skilled hacker. 

Concerning the non-backdoored aspect, it can be much harder to respect in your setup since this type of hardware can be much more expensive. All regular computers have some type of hidden software that can access the computer without the owner’s permission, called backdoors.

Over the years, there have been many scandals as customers learn that hardware manufacturers have been hiding these intrusive backdoors from their users. Often, they are hard to detect and almost no device is free from this security hole.

Non-backdoored computers are generally harder to operate since users will need a certain degree of expertise in command-line operations and Linux operating systems. Forget your easy Windows or MacOS interfaces.

Self-Generated Entropy

Entropy can be interpreted as the level and quality of randomness used by the algorithms in a wallet to generate your private keys. Therefore, the better the entropy in a wallet, the harder it is for an attacker to break it. It is extremely hard to determine if the entropy used in a wallet isn’t flawed in one way or another, especially for nontechnical users who wouldn’t even think about that component. 

The level of randomness (entropy) employed depends on the quality of the algorithms used. If they are mediocre, it could be easy for a third party to derive the private key from the public address. Most cold storage solutions will invite the user to generate their own entropy with simpler, more understandable means. For example, some techniques consist of rolling high-grade, industrialized dice multiples times. That’s why the additional entropy option is an excellent security measure and allows the user to control their source of randomness.

Software and Firmware Updates and Verification

The software and firmware used in cold storage solutions are also critical components of your setup. Since you will be manipulating data that handles your bitcoins, it is crucial to use open-source software that can be scrutinized by the Bitcoin developer community. Whenever a certain technique is certified as safe by the wider community, you must verify the authenticity of the software you’re using before debuting your cold storage setup.

You can verify the validity of each program by corroborating the associated cryptographic key with the official release of the developer team. If a malicious actor has implemented potentially harmful malware, the associated software hash will change, indicating that it was compromised during the verification process. In a cold storage situation, you should verify each one of the processes involved.

New bugs and malfunctions are discovered regularly. They are often corrected rapidly by the developers, but users must always ensure they’re using the latest versions available for any software or firmware in their cold storage solution.

Ideally, you should run two instances of the same system to be certain that all the data communicated through the processes gives back the same results. For example, if you input the same exact entropy in an offline wallet generator, and you’re given back two different private keys, this indicates that there is a problem. You will have to find the issue before proceeding with subsequent steps.

Cold Storage Physical Environment

When you are ready to begin your cold storage ceremony, you must be sure to deploy it in a completely isolated environment. These measures can seem extravagant, but they are crucial to remain secure. The best environment possible would be a closed, private room where you’re certain no other electronic devices are present, except the ones you use to generate your keys. Some attackers have been able to steal data from air-gapped computers through radio and electromagnetic waves. Even crazier techniques, such as the heat emitted by a computer, have been employed.

We could write a book on all the different ways a hacker could steal data from your computer, so just to be safe, make sure to take Alexa or Siri out of the equation when creating your setup.

Inheritance Planning

No matter how secure your setup is, it is irrelevant if you carry your bitcoins with you to your grave. Each step of your cold storage solution must take into consideration your death or possible incapacitation. It’s a question of balancing out the security of your setup with its ease of recuperation by your designated heir. This is a more personal matter since the distribution of the information depends on the different degrees of trust the bitcoin holder will have with their entourage. 

Further reading: Till Death Do Us Fork: Planning for Cryptoasset Inheritance

Challenges and Problems of Cold Storage

This article is only an overview of the different threats one must take into consideration when thinking about implementing a cold storage solution. When it comes time to actually do it, the individual bitcoin investor will be faced with several hurdles and difficulties.

This is especially true for the nontechnically savvy. Even experienced bitcoiners can be stressed when they’re manipulating large sums of bitcoin. Practicing numerous times before creating your real cold storage is the way to go. Most of the user experience and interfaces related to bitcoin cold storage solutions are, quite frankly, terrible. This is due to the fact that most of the software tools used are open-source, where user-friendliness isn’t a priority.

Don’t become discouraged just yet. When one thinks about the pain and hassle of implementing their own cold storage solution, they just need to think about the pain associated with losing their bitcoins, knowing they could’ve protected them. This is especially true when/if the price of bitcoin goes to the moon — you’ll want to have peace of mind knowing your wealth is safe. 

The different solutions are getting better and easier, but they still require an extra step from the individual.

For those who want to start to look into it, I suggest looking into the Glacier protocol, which has clear step-by-step instructions. 

Nontechnical friends should look out for trusted sources and technical helpers who can guide them in the process. Above all, be sure to do your own research before following any protocols or purchasing any devices.

Stay cold, stay safe!

This is an op ed contribution by Maciej Cepnik. Views expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.

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NEO Price Prediction: Long-term (NEO) Value Forecast – June 2

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  • The long-term outlook is in a bullish trend.
  • The 1.618 in the fibs at $19.17 is the bulls target in the long-term.

NEO/USD Long-term Trend: Bullish

Supply zone: $20.00, $30.00, $40.00
Demand zone: $2.00, $1.00, $0.50

NEO continues in the uptrend in its long-term outlook. The strong pressure on the cryptocurrency by the bulls’ comeback at the 61.8 on 18th May has kept price up with new high each week. $12.59 and $15.04 in the supply area were the highs on 20th and 30th May respectively.

The new week is started on a bullish note with today’s opening candle at $13.72 higher than last week opening price at $11.45, an indication that the bulls are more in the market.

Price is above the two EMAs that are fanned apart which suggest strength in the trend and in this case the uptrend.

The journey to 1.618 of the fib extension with price at $19.17 in the supply area is the bulls target in the long-term as the bullish momentum increase and more bullish candle open and closed above the two EMAS.

The views and opinion as expressed here do not reflect that of BitcoinExchangeGuide.com and do not constitute financial advice. Always do your own research.

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Argentina Using Bitcoin To “Skirt Capital Controls” – Economist Alex Kruger

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  • One BTC’s trading at $9,143 USD in Argentine exchange Ripio
  • Argentina’s black market peso fell 4.56% to an all-time low of 76.75 against USD
  • President Alberto Fernandez says Argentina is in virtual default, compares its economic solution to the 2001 crisis

Argentina is recording its highest volume week ever on LocalBitcoin, a peer-to-peer Bitcoin exchange platform. Although it has been at the highest volume in terms of the Argentine peso, the volume in terms of BTC is still small versus 2016.

In early April 2016, it hit its peak at 228 BTC, however, at that time, the value of 1 BTC was around $420. Today, 1 BTC is worth more than $7,365.

Source: Usefultulips.org

As per crypto exchange Ripio, the current value of 1 BTC is $548,197 Argentine peso which equals over $9,143 USD, trading at a premium of 23.5%.

On LocalCrypto, however, this is not the case as there are only about one hundred traders in Argentina in the past month. The Argentine peso is 25th by volume on the platform, reported LocalCryptos, but last month they added Bitcoin and could see these low volumes changing soon.

Capital Controls driving the need for Bitcoin?

Matt Ahlborg of UsefulTulips said, “Argentina had its highest volume day ever on Localbitcoins yesterday as capital controls on dollars increased earlier this week.”

Today, Argentina’s black market peso fell about 4.56% to an all-time low of 76.75 against the US dollar, pushing it further away from the official spot rate, which has been held steady by strict capital controls imposed in September.

Argentina’s new Cabinet chief, Santiago Cafiero said a new bill that is sent to Congress will hike taxes on goods and services purchased in US dollars to as high as 30%.

The move aims to stabilize peso that has lost over 80% of its value over the past four years, that fanned high levels of inflation, under former president Mauricio Macri.

On Sunday, new president Alberto Fernandez said Argentina is in virtual default, comparing its economic solution to the 2001 crisis. The country is currently in recession and its economy is expected to shrink by 3.1% in 2019.

“It is not the same as 2001, but it is similar. At that time poverty was at 57 percent, today we have 41 percent poor people; then we had a debt default, today we are in virtual default,” Fernández said in an interview.

Economist Says, That’s Not the case

Could it be that Argentineans are finding safety in Sats? According to economist and trader Alex Kruger, this is not the case.

“Bitcoin in Argentina is not used for safety, but as a temporary vehicle to skirt capital controls,” he said.

In September, he pointed out how the LocalBitcoin chart showing “exploring volumes” has been in the local term that has been because of the peso devaluation and not because Argentines are using the flagship cryptocurrency to “escape the economic crisis.”

In one of his recent tweets, he shared the findings of a poll he ran where he asked Argentine bitcoiners the reason behind their BTC purchase.

Out of the 3,000 people contacted, only 100 reverted that revealed only 10% bought BTC to protect themselves from the devaluing Argentine peso. The majority 80% is in it just for long or short term speculation.

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Here’s Why the Bitcoin Price Has Crypto Traders Railing at Bart Simpson

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Bitcoin’s contemporary worth actions have crypto buyers in all places railing at Bart Simpson for roiling the marketplace. Below, we’ll provide an explanation for why, however first, let’s check out the flagship cryptocurrency’s actions lately.

Bitcoin Price Trades Sideways

Bitcoin worth motion has now not modified a lot since our previous analysis. The virtual forex continues to pattern within a slender channel. Whether or now not this channel is a bull flag can’t be decided simply but. The best certain factor within the present pattern is bitcoin’s talent to carry onto positive aspects it made all through February 8’s spectacular bull run.

As of Thursday afternoon, the bitcoin-to-dollar rate (BTC/USD) used to be buying and selling at $3,576, down a modest 0.02 % because the Asian consultation open. Both the amount and volatility are decrease because the earlier upside run. That reasonably hints that the bitcoin worth is last in in opposition to its subsequent large transfer. Nevertheless, the intervening time bias struggle has made it tricky to are expecting which course bitcoin would pursue within the coming days: downward, sideways, or upward.

Bitcoin Divided Between Bart Simpson and Bull Flag

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The ongoing bitcoin worth motion has first introduced us earlier than the very well-known Bart Simpson. Yep, that Bart Simpson who may be our bearish indicator for lately – no pun meant. But earlier than we reside additional, let’s take a look on the symbol within the tweet beneath:

Technically talking, a Bart Simpson development happens when a sideways motion follows an sudden spike in worth, after which the fee drops again once more – all of sudden. The worth motion suits the form of Bart Simpson’s head.

In the present bitcoin worth motion, the BTC is midway becoming the definition of the Bart Simpson development. A complete Bart will broaden if the cryptocurrency undergoes a unexpected bearish correction, such that it erases its earlier positive aspects. Should that occur, bitcoin is taking a look at a drawback goal in opposition to $3,355. That’s what a immediately Bart Simpson head can do.

bitcoin, Btc USD, bitcoin price

BITCOIN 4H CHART | SOURCE: COINBASE, TRADINGVIEW.COM

But the glass is part complete. The bitcoin worth has now not fully invalidated the bull flag formation, which turned into a central level of debate in our earlier research. The BTC/USD price remains to be consolidating within just a little descending channel, which might imply there’s nonetheless an opportunity that the pair would lengthen its upside momentum.

A retest of the descending channel resistance, coupled with an building up in quantity, will ascertain a bull flag. Then, bitcoin will be capable of ruin above the mentioned resistance to set the following upside goal in opposition to the crimson line at the most sensible (within the chart above). From a broader standpoint, this higher crimson trendline makes the resistance of a medium-term symmetrical triangle. Have a glance:

bitcoin, Btc USD, bitcoin price

BITCOIN 4H CHART | SOURCE: COINBASE, TRADINGVIEW.COM

 Bitcoin Price Intraday Targets

As lengthy because the bitcoin worth remains within the descending channel, we can stay our bets within the vary. That being mentioned, a jump from strengthen would have us open a protracted place in opposition to resistance. Simultaneously, a pullback from resistance would have us input a brief order in opposition to strengthen.

We will keep away from putting breakout goals for lately.

Instead, we’ll go away you with one thing to chunk on:

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Bart Simpson Image from Shutterstock. Charts from TradingView.

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Early Bitcoin Adopter Throws Cold Water On Halving Narrative; Here’s Why

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As NewsBTC has covered over the past few weeks, a debate has erupted around Bitcoin’s impending block reward reduction. Informally known as the “halving” or the “halvening,” every four years the number of BTC issued per block (every 10 minutes or so) gets cut in half, resulting in a negative supply shock on the market.Analysts are currently divided over whether or not it will affect the underlying BTC price in a positive way — we just published another report on why the halving isn’t priced in from a derivatives perspective.While bulls have a good argument due to the Stock to Flow model popularized by pseudonymous quantitative analyst PlanB, a prominent early Bitcoin adopter recently came out in the side of bears, arguing that the halving will not help BTC investors.Related Reading: Bitcoin Price Likely to Jump After Christmas; Here’s Why“First Bitcoin Startup Investor” Bashes Halving NarrativeRoger Ver, an early Bitcoin evangelist who invested in Blockchain.com, Bitcoin.com, BitPay, amongst other crypto companies, recently remarked that he sees a “very real possibility the price of Bitcoin Core (BTC) does not go up after the halving.” This comment was made echoing a remark made by Melem Demirors of CoinShares, who cited financial derivatives as a potential dampener on the positive effects of the halving.The now Japan-based Ver, trying to build out his own thesis on the matter, remarked that he thinks the price won’t up because ” the blocks are full and there is no room for additional commerce to take place on chain.” With this, he is seemingly referring to the sentiment that the economic activity of a chain will affect the price of the asset that is based on top of it.There is a very real possibility the price of Bitcoin Core does not go up after halving.For the first time, the blocks are full and there is no room for additional commerce to take place on chain.Bitcoin Cash on the other hand, has
an amazing future ahead. https://t.co/z4tC7jij7d
— Roger Ver (@rogerkver) December 26, 2019 Related Reading: Why Did Youtube Crack Down on Crypto Channels? Lawyer Weighs InVer Thinks BCH Will Beat BTCVer’s latest comments on the Bitcoin halving come shortly after he remarked in two mainstream media interviews that he expects for BCH to rapidly appreciate against BTC.Per previous reports from NewsBTC, the cryptocurrency entrepreneur and investor told CNBC in an interview that he thinks the market capitalization of Bitcoin Cash is poised to appreciate by over a “thousands of times where it currently is because it’s looking to become peer to peer electronic cash for the entire world.” For some context, BCH would be trading $191,000 apiece if it was trading 1,000 times higher than what it is trading at now.He doubled down on this opinion in an interview with Forbes, saying that he expects for BCH’s market capitalization to supplant that of BTC:“Bitcoin.com is partnering with more household names to bring BCH usage to actual commerce for real people and real businesses. As that adoption of BCH-based commerce grows, so will its market cap.”While Ver has belief in this sentiment, not everyone is convinced that Bitcoin Cash will outperform BTC by that much, if at all.In the wake of his aforementioned interview on CNBC, the crypto community erupted, pledging not to take Ver’s rhetoric lying down. Dan Hedl, a long-time Bitcoiner and industry executive/entrepreneur, wrote on Twitter:“Hey @JoeSquawk whats up with this reporting on bcash by CNBC? Roger is saying factually incorrect information about adoption and identity.”Related Reading: Is the Bitcoin Halving Priced In? No Way, and Here’s WhyFeatured Image from Shutterstock

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Canaan’s New 5-Nanometer Chips to Escalate ASIC Arms Race With Bitmain

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Chinese mining application-specific integrated circuit (ASIC) manufacturer Canaan will launch new, improved mining machines with 5-nanometer chips in Q1 2020.

Chinese industry news outlet 8BTC reported on Dec. 24 that the new ASICs will have significant advantages compared to the previous generation. The new firm’s 5nm manufacturing process is expected to improve performance, power and area scaling.

A significant development

The company expects to scale the production of this new product series faster than it did with its 7nm chips. The number of nanometers refers to the size of the features of the silicon chip, 5nm approaches what is possible with conventional electronics. For scale, 1nm is approximately equivalent to the width of two silicon atoms.

As the features in chips become smaller, it becomes possible to fit more transistors in a silicon die of the same size. At the same time, the electric current has to travel less distance in the circuit to perform a calculation, which means that efficiency is improved and the amount of heat is decreased when the features are smaller.

Canaan is one of the few cryptocurrency-related companies that managed to go public with a $90 million Initial Public Offering (IPO) held in November. As Cointelegraph recently reported, the firm’s shares have seen a 40 percent drop in value since the IPO.

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