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What is the Difference Between a Hot and a Cold Bitcoin Wallet?

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Like a leather wallet keeps your fiat bills safe, a bitcoin wallet helps you store and spend cryptocurrency. Of course, bitcoins are digital currencies that cannot be held in a leather wallet. So, the wallet does not keep the coins physically but it stores the private keys used to access your bitcoin address.

Types of Wallets

The categories of bitcoin wallets depend on their design. You can have a desktop, mobile, hardware, or an online wallet.  In fact, you can even get a paper wallet for your bitcoins. Then, another taxonomy for the wallets is the internet connection. This is the major difference between a hot and a cold wallet.

If a bitcoin wallet connects to the internet, then it is hot. Likewise, a wallet that does not depend on the internet is cold. 

The fact that the two types of bitcoin wallets have distinct functions makes it prudent to keep both. For instance, a hot wallet is connected to the internet, and thus useful for placing the bitcoins you want to spend or trade for other digital currencies. In contrast, cold storage is free of the internet. Thus, it’s a reliable place to store the bitcoins you don’t need to spend. So, you can use the cold wallet to save your cryptocurrency. According to Blockchain Charts, more than 70% of the bitcoins in the world are on cold wallets and only 30% on hot wallets.

In brief, you can store your surplus coins in the cold wallet, and the few spendable in the hot wallet. There are many items you can buy using bitcoins, and you will require the hot wallet. You can move the digital coins from the cold to the hot wallet anytime you need to make a major purchase. Thus, you should have the two wallets in place- it’s like having both the recurrent and savings accounts under your name. Read on for a deeper insight in the two wallets.

Hot Wallets

Now you understand the need for an internet connection when using hot wallets. Hot wallets are essential because they form the basis of spending your digital coins. In fact, if you have bought stuff via bitcoins before, you have used a hot wallet.

Security Advice for Hot Wallets

Hot wallets are internet-based, which makes them vulnerable to cyber-attacks while hackers cannot access wallets that are offline. This makes cold wallets safer but hot wallets are generally quite safe too. It depends on how you manage them, though. To access your Bitcoin address, you need to have the private key, and so does the hacker. Anyone who has the key has dominion over your address and digital coins. So, the safety of your private keys should be a top priority so never share it with anyone.

Here are three of the best hot wallets

Mycelium 

Mycelium is a famous organism in botany, but it is also a household name in the world of cryptocurrencies. As a hot wallet, Mycelium is compatible with Android, Windows, and most platforms. As one of the best online bitcoin wallets, Mycelium lets you back up Bitcoin data and generate strong passwords using the Hierarchical Deterministic (HD) protocol.

Blockchain

Blockchain is an online bitcoin wallet that lets you access your address on phone or PC. As a security measure, Blockchain has a strong pin-code security system. The wallet is also user-friendly and helps track the market.

Electrum

Electrum is one of the bitcoin wallets with the toughest security measures. Apart from the HD protocol, Electrum has a system of multiple servers, which makes it hard to hack. 

Cold Wallets

A cold wallet is not linked to the internet and this makes it is safer but less flexible. Hackers target online devices, thus making the cold storage the safer bitcoin storage option. There are several types of cold wallets; paper, physical and hardware bitcoin wallets.

All cold wallets are mainly for offline use, and this has its inconveniences too. For instance, it is not easy to move your digital coins. The process takes time, and thus, the wallet is not ideal for recurrent spending. A cold wallet is not what you want to use for paying for coffee on the go. 

Best Cold Wallets

So, which is the best cold bitcoin wallet? If you want a cold storage for your valuable digital coins, you can choose one of the below-mentioned. 

Trezor

Trezor is an offline bitcoin hardware wallet. The cold storage not only offers security for cryptocurrencies, but it is also easy to use. Firstly, Trezor has a high-level security owed to the lengthy seed. Secondly, Trezor boasts of being the very first hardware bitcoin storage to have a screen. Its ergonomic nature makes it worthwhile in the list of the best cold storage for bitcoins.

Ledger Nano

If you are looking for a smart card based wallet, then you should consider buying the Ledger Nano. For €58.00 only, you are assured of an easy-to-carry cold storage for digital coins. It looks like a USB disk, and it’s very ergonomic.

 

Hot and cold bitcoin wallets all store your digital coins. The hot BTC wallet is best for ‘teller’ services, while the cold bitcoin wallet is worthwhile for savings. Each type of wallet has its cons and pros, but it’s advisable to use both types of wallets. 

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November 30, 2019: OKEX and BitcoinKE Partner for a FREE Crypto Margin Trading Class

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FREE Crypto Margin Trading Class

After a full-house event in Nairobi for the CrypTour through Africa, OKEx is back again to host its popular Genesis Trading Classe, titled “Crypto Margin Trading.”

The class will cover the following:

  • Basics of crypto trading
  • Trading tools
  • Margin trading
  • Reading of trading charts
  • Trading psychology
  • among other topics.

You don’t want to miss this exciting class!

Come and network with other crypto enthusiasts over drinks and snacks. There will be a jam-packed list of speakers who will also be joining for this class.

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EVENT DETAILS:

DATE: SATURDAY, 30TH, NOVEMBER 2019

TIME: 11:00 AM – 5:00 PM

VENUE: MARBLE ARCH HOTEL, LAGOS RD, OFF TOM MBOYA STREET, NAIROBI, KENYA

REGISTER: http://bit.ly/BITCOINKEOKEX2019

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Retired NBA Player Allegedly Scammed Ghanaian Company Out of $825,000 in Bitcoin

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NBA Player

Retired NBA player, Isaac Edward Austin, has allegedly scammed a Ghanaian Company out of $825,000 in bitcoin (BTC). The money was reportedly acquired with the promise of investing it in a bitcoin automated trading programme.

Bitcoin Investment Scam

bitcoin doublerThrough the Isaac Edward Austin (IEA) and Tudor Trust, Austin reportedly masqueraded as a trustee with the ability to help a Ghanaian company make a profit on a bitcoin investment. The two parties signed a contract on July 3, 2019. This contract is among other documents that have been shared on mynewsgh.com indicating the scam took place.

The company sent to a bitcoin investment at a strike price of $11,000 per bitcoin, totaling to $825,000, to Austin expecting to receive back the original investment plus profits. However, Austin failed to make the payment at the close of trading as per the agreement.

A victim of Austin’s scam shared his experience as follows: “He will take your BTC and you will never get your investment back or your returns. On the day of payment, he will tell you story after story filled with lies of issues why the BTC could not be delivered on the day of payment. From him having a heart attack, to the coin being sent to the wrong wallet, to him being in a queue at the bank, to him waiting for the trade to conclude, to the funds being held by the bank. Week after week after week of unresolved issues even when he has confirmed the day before that all is set 1000 percent to deliver and conclude the transaction. He is a fraudster of the highest order. Stay away from him. We have all the proof – contracts, letters, and messages.”

One of the other documents mynewsgh.com obtained is a letter sent to Austin notifying him of his failure to meet the agreed terms of the contract. The Ghanaian company expected their money back on the same day they signed the contract with Austin. The funds expected should have been 75 BTC going for a strike price of $11,000.

In the letter, the company gave Austin 48 hours to pay them their money – failure to which they were going to take legal action.

Is the Scammer an Imposter?

According to the documents shared on Ghana Web, the bitcoin scammer’s date of birth and height is similar to the former NBA player, Isaac Edward “Ike” Austin as indicated on Wikipedia. So, could this be a case of a retired basketball player turning into a scammer or is someone impersonating him? The answer to this question is unclear.

This LinkedIn profile of an Isaac Austin, who has been the Finance Director and Trustee of Tudor Trust and Finance Society LLC since June 2012, does not seem authentic. Although this profile has some similarities to the former NBA player’s personal information as written on Wikipedia, the years he attended Arizona State do not coincide.

Furthermore, the profile on LinkedIn says Isaac Austin took a Bachelor’s Degree in Liberal Arts and Sciences for one year which is not the usual study period for a degree course. There is also no mention of the former NBA player being a trustee of IEA and Tudor Trust.

The upturn of the crypto market experienced in mid-2019 appears to have spurred scammers into action. This scam comes after another bitcoin investment deal in Nairobi went wrong between December 2018 and May 2019.

That said, these scam stories are a lesson to potential bitcoin investors that they are better off managing their own investments as opposed to handing funds to someone to manage them. If the Ghanaian company had carried out thorough research, perhaps they would have noticed the obvious red flags.

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The Golix Controversy: Has the African Exchange “Exit Scammed” Users And Investors?

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Golix exit scam

Prior to May 2018, Zimbabwe-based bitcoin exchange Golix was bullish about its future prospects. The startup claimed it had raised $32 million from a token sale and had plans to set up operations in several other African countries. However, more than a year later, the digital asset exchange has had a reversal of fortunes and, after its forced shutdown in Zimbabwe, some of Golix’s former clients are struggling to get their funds reimbursed despite promises and frantic efforts to recover these. 

Embezzlement Allegations

Former Golix users now point to possible embezzlement of funds by Golix executives while one investor in the startup blames the hostile operating environment as the reason for the company’s general failure.

Tawanda Kembo was the chief executive officer (CEO) of Golix when it was shut down in Zimbabwe. Bitcoin Africa reached out to him to get his side of the story but he had not responded to our questions at the time of publishing.

However, Bitcoin Africa still managed to contact Taurai Chinyamakubvu, an individual who says he was an investor in the company. Chinyamakubvu claimed he is not aware if client funds had been reimbursed or not since he was not involved in the day to day affairs of the crypto startup.

“On funds, you can check with the CEO, he was doing the day to day stuff. I was just an investor,” Chinyamakubvu pushed back when asked if they had recovered client funds that were reportedly locked in banks.

In May 2018, Zimbabwe’s central bank issued a directive that forbade financial institutions from dealing with crypto exchanges. According to Golix, this led to banks blocking access to client funds and the company from using the financial system.

Central Bank Defiance And Crypto Adoption

GolixWhen asked why Golix had not resumed operations following a High Court ruling that set aside the central bank order, Chinyamakubvu suggested that Golix’s Zimbabwe operations remain hamstrung by the central bank’s reluctance to lift the order.

“They (Reserve Bank of Zimbabwe) did not lift the order they sent to banks. So no bank wants to defy a regulator. But that said, you muddy the water once, that’s enough to change its colour for a while,” he stated.

Chinyamakubvu is convinced that the central bank’s apparent defiance of a court ruling continues to hinder the growth of the crypto space in a country that should be embracing privately-issued cryptocurrencies.

Zimbabwe has been plagued by hyperinflation for the past two decades, which is spurred on by a volatile fiat currency. Critics point to the central bank’s penchant for unrestrained printing of money as the main cause of the country’s currency troubles.

The Golix investor called the central bank’s decision to shut down the crypto exchange ‘retrogressive’.

Ironically, the Reserve Bank of Zimbabwe recently announced the setting up of a committee to study financial technologies such as bitcoin. The regulator now says it wants to come up with what it calls a “National Fintech Strategy.”

Disappeared Client Funds

Bitcoin Africa also reached out to former Golix clients as it tried to establish what happened with their funds. Some did not respond but a few did – although they requested anonymity. One lady, in particular, expressed exasperation with the way Golix has been handling the issue.

“I do not know about others but I still have not been reimbursed. Tawanda (CEO of Golix) has made several promises to settle but nothing has happened,” claimed the lady who preferred to remain anonymous.

She further explained that currently there is nothing noteworthy happening but promised to reveal more details as and when they become known. 

Kembo on the Run?

Following the central bank decision to stifle cryptocurrency trading, some crypto traders have gone on to create informal trading platforms using social media networks like Whatsapp, Telegram, and Facebook.

Bitcoin Africa was also able to get access to one such Whatsapp chat group feed wherein clients are discussing strategies of recovering funds from Golix. In a discussion that occurred in July 2019, one member of the group asks fellow members to furnish her with information that includes Kembo’s personal identification number or even a vehicle registration number. This could then be used to help a hired tracing agent to locate him.

Tawanda Kembo

Tawanda Kembo, Golix CEO

It is apparent from the discussions that Kembo has made several promises – including re-payment plans – to reimburse but nothing has happened to date. Adding intrigue to the controversy, this client claims Tawanda told them he had lost the key to the cold storage wallet. Thus, he could not access the bitcoin.

Keys to a crypto wallet are essentially a passcode that grants access to funds and without them, the funds are lost and cannot be recovered.

In the meantime, another post on the same thread suggests that Chinyamakubvu was being disingenuous when he expressed ignorance about the status of client funds. In the post, another member insists that prior to the central bank order, Golix was asked to remove all funds before accounts were closed.

The anonymous member was referring to a part of the central bank circular to banks which states the following:

“Exit any existing relationships with virtual currency exchanges within sixty days of the date of this Circular and proceed to liquidate and restitute existing account balances.”

This central bank circular was issued on May 11, 2018, and Golix seemingly had enough time to exit from banks as well as to reimburse clients.

No Consumer Protection

The anonymous member suggests that since this did not happen, the issue should now be treated as a criminal case.

It is apparent from the rest of the discussion that members were aware of the risks involved with crypto businesses. The central bank had warned the public of risks of dealing with cryptocurrencies and associated businesses prior to Golix’s demise.

Zimbabwe does not have consumer protection laws that specifically deal cryptocurrencies and those dealing with such digital currencies do so at own risk, a point clearly articulated by the central bank circular. Perhaps it is with this in mind that some Golix clients are now pursuing fraud charges against Golix executives.

Lack of legal protection is another factor inhibiting the widespread adoption of cryptocurrencies but that may yet change as the central bank is now having a change of heart.

Bitcoin Africa will continue to follow the events surrounding the alleged exit scam of Golix and update our readers when new information surfaces.

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