In one of our previous articles, we wrote about Bitcoin’s history, its benefits and disadvantages. Now is the time to find out how you can store bitcoin.
What is a Bitcoin wallet?
When you’re on the start of your crypto journey, the first step you’ll have to take is getting a wallet. A wallet allows you to send and receive bitcoin, and of course, to store it.
And, now the most important fact about wallets: they contain private keys, which are secret numbers that allow you to spend your Bitcoins. Keeping them safe and secret is a golden rule of the crypto world.
Hot wallets vs Cold wallets
Crypto wallets can be divided into two main groups:
- Hot (online) wallets, which store the above-mentioned private keys online, or on devices connected to the Internet, and
- Cold (offline) wallets, which store private keys on offline hardware or on paper
A hot wallet has highly accessible funds, but it’s more vulnerable to hacking and phishing. On the other side, a cold wallet is more secure compared to a hot wallet, but it has less accessible funds, and as any physical device, it can get lost.
For example, James Howells, a software developer and computer engineer, accidentally threw away a hard drive with the key to more than 7,500 mined bitcoins worth around $60 million in bitcoin. To this day, the hard disc hasn’t been found.
So, which bitcoin wallet to choose? Well, there is no simple answer to that question. It’s totally up to you.
Both hot and cold wallets come in different forms. Let’s take a look at some types of cold wallets:
A hardware wallet is a physical device that stores your private keys. These types of wallets are protected with passwords or a PIN code. A hardware wallet is highly secure, and even in case you lose it, you can retrieve bitcoins by creating a backup code. Some of the most popular hardware wallets are Ledger Nano S and TREZOR.
A paper wallet is quite simple. It’s a printed out sheet of paper with the private key and public address on it. Keep in mind that this type of cold wallet is risky. If you lose the paper, someone can find and it and access your funds.
Encrypted USB stick
When creating a paper wallet, instead of printing it out, you can save it on an encrypted USB stick. Just make sure that you do this on an offline computer. An example of an encrypted USB stick is the Kingston Digital DataTraveler 4000, which you can buy on Amazon for $28.
Now, let’s take a look at the hot wallets:
Desktop wallets for storing bitcoins are usually available for most operating systems such as Windows, Linux, and Mac, and you can install them like any other software. Just make sure that you put all security measures such as such as antivirus and anti-malware software. Some of the popular desktop wallets are Exodus, Bitcoin Core, Electrum, etc.
Web wallets are a type of hot wallet that you can acces through Internet browsers such as Firefox and Google Chrome. Since web wallets are run on your browser, they are prone to cyber attacks and hacking. These types of wallets can be hosted or non-hosted. A popular hosted web wallet is Coinbase for example, while MyEtherWallet and MetaMask are popular non-hosted web wallets.
And last, but not least:
Mobile wallets are, you guessed it, mobile-based. They are quite popular on the market since they are easy to use and compatible with Android and iOS. Examples of mobile wallets are Mycelium and Coinomi. If you decide to use a mobile wallet, you should keep in mind that they are just like any hot wallet, vulnerable to network attacks.
When it comes to the way you choose to store bitcoin, there is no such thing as “one size fits all“. Just keep in mind that cold wallets tend to be more secure than hot wallets. But, storing funds on hot wallet doesn’t necessarily mean it’s unsafe, it just means your funds are more at risk. So do your research and see what fits you the best.