How To Store Your Bitcoin And Keep It Safe: Beginners Guide
You need to understand that the “how” you store your Bitcoin goes a long way to determine its safety. It doesn’t matter if it’s for investments purposes or as a medium of exchange. Bitcoin is a digital currency, and just like paper money (fiat), you also store it in wallets.
The underlying reason for storing Bitcoin is to keep your private keys safe, but accessible to you whenever you want to make transactions.
Also Related: How can I start investing in Bitcoin in Nigeria
Since the invention of Bitcoin and other digital currencies like Ethereum, Cardano, Ripple, etc., people have lost their coins. Peradventure your Bitcoin is lost or stolen; there is absolutely nothing you can do to get it back.
This article guides you on the best and safe way to store your Bitcoin to avoid a preventable loss. Some of the best ways to keep your Bitcoin and other digital currencies safe is by storing them in wallets. You can either store your Bitcoin in a hardware wallet, multi-signature wallet, cold storage wallet, hot wallets, and so on. We will discuss these Bitcoin wallets later in the article.
Why Do You Need To Store Your Bitcoin?
The reason for storing Bitcoin can be summarized as follows
- To prevent accidental loss of your cryptocurrency
- It is a verification that the Bitcoin is genuine
- To ensure your privacy and protect yourself against spying
- Protecting yourself against theft
- To have easy access to spending or moving your Bitcoin
Storing Bitcoin ensures that your private keys are safe and your coins are easily accessible. It is also a way to confirm that you received “real” Bitcoins while preventing an adversary from spying on you.
What is a Bitcoin wallet?
We have agreed that we can store our Bitcoins and other digital currencies in a wallet. We must have heard of Bitcoin wallet, Bitcoin hardware wallet, offline Bitcoin wallet, etc. What do we mean by this Bitcoin wallet? Just like your physical wallets, if you lose the keys, you may not gain access to your money again.
Your wallet generates a master file that stores both your public and private keys. You must backup this file in case the original file is damaged or lost; else you risk losing your funds. You can store your private keys in different places like your mobile device, computer, or a piece of paper.
You have to note that your wallet doesn’t stay on any single device; rather, it resides on the Bitcoin blockchain. The same way your banking app doesn’t truly “hold” the money in your checking account. In terms of security and safety, the safest option is Bitcoin hardware wallet. Meanwhile, wallet apps work well and are relatively safe and secure to hold your Bitcoin.
The most prominent hardware wallets leverage unique layers of security to ensure your private keys are not stolen. However, if you lose your Bitcoin hardware wallet, the coins will be gone unless you have a backup of the keys. On the other hand, the least secure is the Bitcoin online wallet. The online wallet allows you to store your Bitcoin on an exchange.
Online wallets are risky because a third party holds the keys. For most people, it is easier to set up an online wallet. Now you are faced with choosing between your convenience and the safety of your Bitcoin. Most serious Bitcoin investors employ a hybrid strategy; holding a core long-term amount offline while maintaining a spending balance in a mobile account.
Types Of Wallets To Store Your Bitcoin
Let us consider the different wallets that you can use to store your Bitcoin and other digital currencies.
These wallets exist online, and the keys are stored in a distant server that is run by a third party. They often have a more user-friendly interface, although you will trust a third party with your private keys. It means your funds are more susceptible to theft. Good examples of these cloud wallets include Coinbase, Blockchain, and Lumi wallets. Also, most of these cryptocurrencies like Bitcoin have their native wallets. Coinbase and XAPO offer additional security features to prevent theft.
There are many things to consider before going choosing a cloud wallet. You will have to trust the security measures put in place by the third party. It is essential to be sure that the host won’t abscond with your money or close down and restrict your access to your account.
You can install software wallets directly on your computer, hence giving yourself control over your keys. Most of the software wallets to store your Bitcoin have relatively easy configuration and are free. Meanwhile, it is your sole duty to ensure the safety of your private keys when using a software Bitcoin wallet. In a case where your computer is hacked, the adversary can gain access to your wallet and your Bitcoin.
Although you can download the original software Bitcoin Core Protocol which takes a lot of space, most of the available Bitcoin software wallets today are “light” wallets. These Simplified Payment Wallets do not download the entire ledger; they, however, synchronize to it. It is essential that you confirm the authenticity of a wallet to ensure you download the original copy. Some nefarious programmers create clones of various digital currency websites and offer downloads without charge. If you make a mistake to download such applications, your account can be hacked.
These mobile Bitcoin wallets are apps for your smartphone. It comes in handy when you want to pay for something using your Bitcoin or if you want to buy, sell, or send Bitcoin while on transit. All online wallets and a majority of the desktop ones all have mobile versions.
Bear in mind that many online wallets will store your keys on the phone, hence the possibility of losing your Bitcoin if you lose your phone. It is always good to have a backup of your keys on a different device and ensure to print out your seed phrase. Good examples include TRUZACT, Luno, Trust wallet, etc.
They are generally more secure because they are mostly offline and hence improbable to hack. Meanwhile, they can be stolen or lost, hence the need to always backup your keys. Most large Bitcoin investors keep their hardware wallets in secured locations like bank vaults. Notable examples of hardware wallets include Trezor, Keepkey, and Ledger.
They are more secure because they are not connected to the internet; therefore, they cannot be hacked. However, you need to keep them away from fire and water. They are pieces of paper that contain the private and public keys of a Bitcoin address. It is suited for the long-term storage of your Bitcoin or for giving out Bitcoin as a gift to friends and family. They are easier to lose; you have got to be very careful with your paper wallet.
There are lots of options available when you want to store your Bitcoin in Bitcoin wallets. Therefore, you have to consider safety and accessibility when choosing your most preferred Bitcoin wallet. For your contributions and questions, kindly use the comment box provided below.