How to Store Your Bitcoin?

Before you have bitcoin, you need a place to store it. That place is called a "wallet." Instead of actually holding your bitcoin, it holds a private key that allows you to access your bitcoin address (which is also your public key). If the wallet software is well designed, it will look as if your bitcoin really exists, which makes using bitcoin more convenient and intuitive.

Actually, wallets usually hold several private keys, and many bitcoin investors have several wallets.

Wallets can live on computers and / or mobile devices, on physical storage gadgets, or even on a piece of paper. Here we will briefly look at various types.

Electronic wallet

Electronic wallets can be software downloaded, or hosted in the cloud. The first is only formatted files that live on your computer or device, which facilitates transactions. Hosted wallets (cloud-based) tend to have a more user-friendly interface, but you will trust third parties with your private key.

Software wallet

Installing a wallet directly on your computer gives you security that you control your keys. Most have relatively easy, free configurations. The disadvantage is that they do need more care in the form of reserves. If your computer is stolen or damaged and your private key is not stored elsewhere, you lose your bitcoin.

They also need greater security precautions. If your computer is hacked and the thief holds your wallet or your private key, he also holds your bitcoin.

Original software wallet is the Bitcoin Core protocol, a program that runs the bitcoin network. You can download this here (that doesn't mean you have to be a full operational node), but you also have to download the ledgers for all transactions from the beginning of the bitcoin time (2009). As you can guess, this requires a lot of memory - at the time of writing, more than 145GB.

Most wallets used today are "light" wallets, or SPV (Simple Payment Verification) wallets, which don't download the entire ledger but synchronize it with the original item. Electrum is the famous SPV desktop bitcoin wallet that also offers "cold storage" (a fully offline option for added security). Exodus can track many assets with a sophisticated user interface. Some (such as Jaxx) can have various digital assets, and some (such as Copay) offer the possibility of a shared account.

Online wallet

Online wallets (or cloud-based) offer increased convenience - you can usually access your bitcoin from any device if you have the right password. All are easy to set up, come with desktop and cellular applications that make it easy to spend and accept bitcoin, and most are free.

The disadvantage is lower security. With your private key stored in the cloud, you must trust the host's security measures, and it won't disappear with your money, or close and deny your access.

Some of the leading online wallets are connected to exchanges (such as Coinbase and Blockchain). Some offer additional security features such as offline storage (Coinbase and Xapo).

Cellphone wallet

Mobile wallet is available as an application for your smartphone, very useful if you want to pay for something in bitcoin at the store, or if you want to buy, sell or send while on the go. All online wallets and most of the desktops mentioned above have cellular versions, while others - such as Abra, Airbitz and Bread - are made taking into consideration cellphones.

Hardware wallet

A hardware wallet is a small device that occasionally connects to the web to enforce bitcoin transactions. They are very safe, because they are generally offline and therefore cannot be hacked. However, they can be stolen or lost, along with bitcoin that belongs to the saved private key. Some large investors keep their hardware wallets in safe locations such as bank safes. Trezor, Keepkey and Ledger and Case are important examples.

Paper wallet

Perhaps the simplest of all wallets, this is a piece of paper where the private and public keys of the bitcoin address are printed. Ideal for long-term bitcoin storage (far from fire and water, clear), or for giving bitcoin as a gift, these wallets are safer because they are not connected to the network. However, they are more easily lost.

With services like WalletGenerator and BitcoinPaperWallet, you can easily create new addresses and print wallets on your printer. Fold, seal and you are ready. Send a few bitcoins to that address, then save it safely or give it. (See our tutorial about paper wallets here.)

Is the bitcoin wallet safe?

That depends on the version and format you choose, and how you use it.

The safest option is a hardware wallet that you keep offline, in a safe place. That way there is no risk that your account can be hacked, your key stolen and your bitcoin taken away. However, if you lose your wallet, your bitcoin is lost, unless you have created a clone and / or keep a reliable backup of keys.

The most insecure option is an online wallet, because the key is held by a third party. This is also the easiest way to organize and use, presenting you with choices that are too familiar: comfort vs. security.

Many serious bitcoin investors use a hybrid approach: they hold the core, long-term offline bitcoin amount, while having "expenditure balances" for liquidity on a cellular account. Your choice will depend on your bitcoin strategy, and your willingness to get "technical."

Whatever option you choose, please be careful. Back up everything, and only tell the nearest and dearest place where your backup is stored.

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