How can I store Bitcoin?
To us, the most important things in life are safety and security. And friendship. Teamwork is great too. Love is also awesome. Same with dogs. And dog gifs. Actually, all animal gifs are important.
But we digress, and while the last few things have nothing to do with Bitcoin storage, they are still very much worth mentioning.
Because Bitcoin can be used in so many ways, you have a lot of options when it comes to storage. Bitcoin are stored in what are referred to as “wallets.” Without a Bitcoin wallet, there is no way for you to buy, store, send, receive, or use Bitcoin.
Bitcoin wallets can be either online, offline, hardware, or software. Depending on the amount of Bitcoin you have, how you want to use your Bitcoin, and how secure you want to be, each type of wallet can benefit you differently.
Bitcoin balances have 'addresses'. A wallet is a software product that manages the address behind the scenes for you.
So, what is a Bitcoin wallet address? A Bitcoin wallet address is just a unique pair of public and private keys. Just like you, each address is unique and extraordinary in its own way. Aww, that was sweet.
A public address, (also called a “public key”) is a string of uppercase letters, lowercase letters, and numbers that always start with “1” and are used to receive Bitcoin. Here’s what that looks like:
A private address, (also referred to as a “private key") is too comprised of upper and lower case letters and numbers. It usually starts with a “5”, “L” or “K”. It looks like this:
Think of your public wallet address like your home address. People need it to send you packages, hang out at your place, or send you lame holiday cards.
Now think about the key that gets you in the door. That’s your private wallet address. You don’t go making copies of that key and giving it away to just anyone. You also don’t run around yelling “Look! This is the key to my house! It’s right here!” You keep it safe and do your best not to lose it when you drink too much.
Now, think of your home as your Bitcoin wallet. You store your valuable items in there. Naturally, it needs to be secure using a lock in which you’d need a key. That lock can be looked at as the kind of wallet you use. How secure is that lock? If you’re the only one that has the private key, then things are looking good.
Your Bitcoin wallet addresses could also be compared to an email address. Think of your @email.com address as your public Bitcoin address. People need to know it in order to send you emails. Now, think of your password as your private address. Again, this is information you don’t let others have. Your inbox is like your Bitcoin wallet. You keep valuable emails in there. Now think of the server, like Google, Yahoo, or Hotmail as the kind of wallet you use.
It needs to be secure.
Here are few things you should know about wallet addresses:
- Much like an email address, you can have more than one Bitcoin address. You might use firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org as your email addresses for different purposes. There’s no limit to how many you can set up.
- Your public address is kind of anonymous. If you watch a public address in the blockchain (remember, it's entirely public) you can learn quite a bit about it over time. And, if you put a name on it it's not anonymous at all. It’s recommended you generate a new public address with every transaction. All wallets offer this option with ease.
- You need the private key to get things out of an address, but you can put things in with just the public address.
Different Kinds of Bitcoin Wallets
ONLINE BITCOIN WALLETS
Online Bitcoin wallets can be accessed from a computer, tablet, or phone with an internet connection. There is no limit to how many online wallets you can open, as it’s entirely free to set one up. You can go to any wallet site, sign up, and be able to buy, store, exchange, and use Bitcoin.
With online wallets, you can generate a new public address and QR code for every transaction. It’s actually recommended that you do so since all transactions are logged in the Blockchain, as we talked about Story 2 and 3.
Ideal For: Online wallets are best for people who make frequent small Bitcoin transactions. If you see yourself using less than a few Bitcoin transactions a week, storing your Bitcoin in an online wallet where you control the private keys will provide convenience and security.
OFFLINE (COLD) BITCOIN WALLETS
Offline Bitcoin wallets can be stored on hard drives, USBs, or even paper. This is a very secure form of Bitcoin storage but isn’t ideal for people who want to use Bitcoin as their day-to-day currency.
Ideal For: Those who hold large amounts of Bitcoin (typically early adopters or traders) and do not often need to make small transactions.
HARDWARE BITCOIN WALLETS
Hardware Bitcoin wallets are physical devices made for the sole purpose of storing your Bitcoin and are the absolute most secure form of Bitcoin storage.
Ideal For: This type of storage is also for people that have large amounts of Bitcoin to store in one place, as well as those that won’t be using those Bitcoin for daily transactions.
SOFTWARE BITCOIN WALLETS
Software Bitcoin wallets are apps downloaded to your computer, phone, or tablet.
Ideal For: These wallets are perfect for people on the go who make in person transactions with other Bitcoin users. For example, if we bought you a cup of coffee and you want to pay us back, we’d just show you our wallet address or QR code, you’d scan it and send us the amount back in Bitcoin.
We can’t stress this part enough, so listen up close: If you’re going to buy Bitcoin from a large exchange, just know that you don’t own the private key to wallet within the exchange. It's important to remove your Bitcoin from large exchanges and put them into a wallet where you own the private keys.
If you don't have your private keys: it’s not really your Bitcoin in that wallet. It’s subject to getting stolen if the exchange is hacked, and also subject to getting taken if the exchange has legal battles. If you’re going to buy from an exchange, unless you are going to trade or use exchange services, remove your Bitcoin from the exchange and move it to a wallet where you hold the private key. Capisce?
YOU DON'T HAVE TO BE A GENIUS
When it comes to the numbers and letters of public and private keys, you’re by no means responsible for remembering them, but you’d ideally like to check the last five characters of a public address before sending Bitcoin or using it to receive Bitcoin. This way you know you’re sending or receiving to the right place, just like you would do with a home address for a package.
Bitcoin are stored in what are called “wallets”. There are multiple kinds of wallets, each with different levels of security. It’s best to store your Bitcoin in a wallet where you hold the private key. If you use Bitcoin for everyday purposes, storing it in an online wallet or wallet app is ideal. If you have a large amount of Bitcoin and don't use it for daily spending, it’s best to keep it in offline storage or on a hardware wallet.