Bitcoinhas been one of the most lucrative investments of the 21st century, so its no surprise that you might find yourself wanting to purchase some. But before you jump the gun, you should know exactly how to store Bitcoin and other cryptocurrencies you wouldnt want to risk losing your hard-earned cash.
Truth be told, storing Bitcoin isnt at all difficult. The key is storing it in a safe, yet accessible place, and knowing how you should store for different purposes. Without further ado, heres our guide to storing Bitcoin.
Although it may sound daunting at first, Bitcoin isnt at all difficult to store. Thats because holding Bitcoin is really just having access to a password a private key which lets you transact with the coins on the public network.
Thats right: storing Bitcoin is as simple as storing a bunch of numbers and letters. This gives you a fair number of options when it comes to the different ways and places you can hold it.
In general, the places you hold your private keys are referred to as wallets. Some wallets can also be used to send Bitcoin (like software ones), while others can only be used to store and receive Bitcoin (like paper ones).
Before we discuss the ways in which you can hold Bitcoin, lets talk a little more about private keys.
Private keys are the alphanumeric passcodes which give you access to your cryptocurrencies, like Bitcoin. Theyre extremely important, because the only way that you can send a chunk of cryptocurrency is by signing the transaction with your secretly-kept private key. No keys means no coins.
Most private keys are 64 characters long, with the characters ranging from 0 to 9 and A to F. Remembering this long passcode is nowhere near as easy as remembering your 4 digit bank pin or your 16 digit credit card number, not to mention the extra 6 characters which can be included (A-F). This is why Bitcoin users choose write down their keys either digitally or physically.
When we talk about the different ways to store Bitcoin, were really just talking about the most secure and accessible places wallets to write down our private keys. Lets take a look at them now.
There are four popular places to store cryptocurrencies: online, on your computer (software), on a physical device (hardware), or on a piece of paper. Discussing these one-by-one, youll see how easy it can be to over-complicate things.
Online wallets are the most frequently used Bitcoin storage systems. With an online wallet, like the immensely popularCoinbase, a third party takes care of storing your private keys. As long as they are trustworthy service, this means that you can send, store, and receive Bitcoin without ever having to touch a private key.
You can also store bitcoins oniPhone bitcoin walletsorAndroid bitcoin wallets.
Software wallets are another lightweight, easy solution to storing Bitcoin. These wallets store private keys on your computers hard drive as secretly and as safely as possible. Software wallets also offer the functionality to automatically transact with your Bitcoin, doing the hard part of the work for you.
Hardware wallets are dedicated devices which store your Bitcoin on a portable, failproof computer. Thats right, theyre boxed-up computers which create, encrypt, and isolate your private keys, preventing them from ever getting out. Whats more, they can be secured with a pin and backed-up with long passphrases, in case anything does happen to the device itself. Although this may sound excessive, it certainly makes hardware wallets a secure way to store your coins.
Our last way of storing Bitcoin is as safe as it is cost effective: the paper wallet. Paper wallets are computer printouts with your private keys written down. While they might be a little problematic to take care of, theres certainly no risk of your printed paper being hacked.
Note: For the most part, you dont buy paper wallets. As a result, the above services will just create a print out for a generic paper wallet, or generate an address and private key for your custom paper wallet.
With four surprisingly unique ways to do so, you might be wondering how best to store your Bitcoins. The thing is, thats not such an easy question to answer.
Why? Because the word best is a little ambiguous: who knows whether youre looking for added security or extra accessibility, and whether youre looking to store pennies or your marriages retirement fund.
With that in mind, well start by discussing the definitively easiest way to store Bitcoin, then the definitively safest way to store Bitcoin, and finally the best way to store Bitcoin under your particular circumstances.
Without a doubt, the easiest way to store Bitcoin is using an online wallet. You need absolutely no technical knowledge; you can buy, sell, and hold in the same place; and theres no lengthy setup or physical limitations.
Its all for a big sacrifice though: having no access to your private keys. This means that in a certain sense you dont own your cryptocurrencies at all, and youve got to hope that the service provider is willing to cooperate when it comes to withdrawing or spending your coins.
The safest way to store Bitcoin would have to be with a hardware wallet. The security offered by a standalone, single-purpose device has no match. Theres almost no risk of your cryptocurrencies being hacked, and its not like someone can steal everything with just the device (as with a paper wallet), thanks to the clever PIN systems.
The sacrifice of storing in a hardware wallet comes as a loss of usability and accessibility, along with a significant price tag. Youll obviously need to carry your hardware wallet around with you when you want to spend, and youll need some technical knowledge to setup and use it effectively.
Now lets try to answer the more complicated question: whats the best way to store Bitcoin? To make a meaningful conclusion, youll need to identify what features and characteristics you need most, and what youre willing to sacrifice instead.
Then, youll need to understand the different selling points and limitations that certain storage methods offer. To help you out with this, weve compiled a table comparing the four wallets we mentioned above:
See if you can match your ideal wallet with any of those listed above, based on both the features and limitations. This is our favorite approach to picking the right wallet.
If you can already see which storage method will work best for you, excellent! Weve done our job.
If not, heres some more handy advice to help you decide:
Remember that you can use a combination of storage methods for your Bitcoin. For example, you could keep a small, liquid amount on an online wallet for quick transactions, while keeping your biggest holdings offline.
If youre serious about holding onto Bitcoins for an extended period of time, forget about using a software wallet or online wallet. Either of these methods have too high a risk of random failure.
Finally, you should know that software wallets exist for mobile devices too. This means that you can use a software wallet even if you dont have a laptop/desktop, or if youre not able to travel with one.