Now that you’ve figured out the technical aspects of buying Bitcoin, it’s time for the next step: storage. Bitcoin and cryptocurrency, in general, have certainly been making waves in the global fintech and finance scenes–as a result, new pieces of software and hardware for the storage, mining, buying, and selling of Bitcoin and other kinds of cryptocurrency have been popping up left and right.
Therefore, it is more important than ever to be discerning. When you’re choosing your method of storage for your crypto, there are a few essential things that you need to consider:
Hot or cold: do I want my coins to be stored online or offline?
A “hot” wallet is a wallet that is in some way connected to the internet. Some of the more popular hot wallets are Coinbase, Copay, and Exodus. While different kinds of hot wallets have varying levels of security, they are not as secure as “cold wallets.”
“Cold wallets” are wallets that keep Bitcoin and other kinds of cryptocurrency stored offline, in “cold storage.” These include hardware wallets (like Trezor and KeepKey) and paper wallets. While cold wallets are not susceptible to hacking, they are vulnerable to other things–elemental damage (i.e., fire and water), or even just getting lost (god forbid). However, they can still be secured, as explained in our in-depth security article.
Who holds my Bitcoin’s private keys?
Since no one can own a physical Bitcoin, the thing that gives someone control over the usage of a single Bitcoin (or a piece of one) is something called the “private key.” The private key is a string of characters that represents a certain amount of Bitcoin. When you spend Bitcoin, the private key is the thing that is sent to complete the transactions.
Some wallets allow users to have control of their private keys; others do not. Choosing which kind of wallet you would like to use is a matter of personal preference. Wallets that store private keys for the user may make some users feel more secure because the wallet’s company is assuming responsibility for the private keys. However, that certainly does not guarantee very much in the way of compensation should that wallet’s server be hacked.
Using a wallet that gives the user access to her private keys (and thus, the responsibility of keeping them safe) means that they are not susceptible to a centralized server attack. However, this also means that you assume the full responsibility of keeping your coins safe.
How often do I need to access my Bitcoins?
Depending on what kind of crypto user you are, you may want a wallet that is very easily accessible. Wallets like Mycelium, Coinbase, and Copay are wallets that have mobile app interfaces that can be used to buy and sell Bitcoin on the go.
How much Bitcoin are we talking?
Having a significant amount of Bitcoin or other crypto means that you’re going to want to use a wallet that is more secure. If you only have a smidgen of Bitcoin, you may be able to get away with storing it on a platform with less security, like an exchange–although this is never a good idea.
The point is that if you have a significant chunk of change invested in Bitcoin, you’re going to want to invest in the gear to keep it safe. The best option for you is a hardware wallet (i.e., Trezor, KeepKey, Ledger), and make sure that you are using it correctly.
Many of the individual companies creating cryptocurrency-centric software and hardware are admirable and have good intentions. Shapeshift and Exodus, for example, are companies that are dedicated to making cryptocurrency investment a quick and easy process, even for the most dedicated of Luddites.
However, there are also plenty of people who see the massive amounts of money being poured into cryptocurrency as an opportunity to take advantage of crypto investors who aren’t expert computer hackers.
Because Bitcoin and other cryptocurrencies exist in a sort of legal “gray area” in many countries, seeking legal retribution or compensation for stolen Bitcoin and cryptocurrency can be a complicated and challenging process–one that is often fruitless. Therefore, doing plenty of research into a coin, and exchange, or a wallet before deciding to use it is imperative
Even if a new Bitcoin wallet is not the malicious work of a scammer, there are a few things that must be researched before deciding whether or not to use a wallet.
What to look for:
The very concept of cryptocurrency itself was born out of an online community. To this day, online communities and resources are the only way to learn about cryptocurrency. One of the best resources is other crypto users, who are often acutely aware of the importance of sharing their experiences.
What kind of particular customer reviews has a wallet received? How does the company respond to these reports? What kinds of actions is the company taking to maintain or increase a positive rapport with their customer base?
Customer Support Resources
A good wallet will have excellent customer support that is available 24/7, or at least very close to that. There are, of course, some notable exceptions to this (i.e., Electrum), but this should still be considered when choosing a wallet. If you decide to use a wallet that does indeed have resources for customer support, choose a wallet that has darn good customer support.
Things you should ask yourself: what kind of support does the company offer–is it email, phone, live chat, or all three? What happens when you try to contact customer support? How long does it take them to get back to you?
Options for Backup and Encryption
One of the downsides of owning and using cryptocurrency (or upsides, depending on your point of view) is that there is no guarantee that you will be able to regain the money that you have invested should it be lost or stolen from you. Therefore, it is imperative that the wallet you choose to use has reliable security practices, methods of encryption, and options for backup.
If the wallet is “hot” (online), what does it use to protect my data as a user (i.e., two-factor identification, multisig login)? How can I backup my wallet? How is the wallet encrypted? What will happen if I lose access to my wallet or my backups?
What Kind of Claims Does the Wallet Make?
This is not just for Bitcoin wallets–it also goes for exchanges, ICOs, and other crypto coins. For example, if a wallet guarantees that it will deposit a certain amount of BTC into your account each day just for using it, run in the other direction. While there are crazy amounts of money to be made in the world of cryptocurrency, there are absolutely no guarantees.
Sadly, the adage is just as valid in the cryptosphere as it is in the rest of the world: if something sounds too good to be true, it probably is.
Here They Are: The Best Bitcoin Wallets
Of course, there are plenty of other Bitcoin wallets that you may like better than these–to each their own. In this context, however, “best” means the most relatively secure and user-friendly wallets that are available today.
Best Hardware Wallet: Trezor
Trezor has been making its name as the industry gold standard for several years. This is an excellent option for someone who holds a good deal of Bitcoin and does not want to rely on a wallet with a third-party server to keep their private keys safe.
Trezor is designed such that even if it comes into contact with an “unsafe” computer whose security has been compromised, no hacker will be able to gain access to your Bitcoins’ private keys. Several kinds of cryptocurrency in addition to Bitcoin are supported on Trezor.
Ledger and KeepKey, while not quite as well-known as Trezor, are also great options for hardware wallets.
Best Desktop Wallet: Exodus
Launched in July of 2016, Exodus is a hot wallet that has quickly gained a reputation for being an extremely user-friendly option with good customer support and a built-in exchange. In addition to Bitcoin, Exodus supports several other kinds of cryptocurrency. Exodus is encrypted and provides mnemonic seeds for backup.
Because Exodus is a hot wallet, it is not advisable to use it to store large amounts of assets in crypto, especially on a computer that you use day-to-day. Additionally, it is not open-source.
Electrum is also a great desktop wallet, but it does not offer any options for customer support. Additionally, it requires a bit of technical know-how (it’s not very user-friendly). Electrum is open source, and it allows the user to hold control of her Bitcoins’ private keys.
Best Mobile Wallet for iOS: Copay
Copay uses multisig login, making it one of the most secure mobile wallets out there. It has been around since 2014, and it also has a desktop interface for Mac, Windows, and Linux. You can easily buy Bitcoin within Copay, but be warned that the app does charge high fees.
Best Mobile Wallet for Android: Mycelium
The company behind Mycelium is continuously working to improve the wallet. Mycelium stores your private keys in its private server, but they are encrypted using your password. Mycelium also offers prepaid cold-wallet cards, so there are some options for cold storage within Mycelium. Mycelium also has an Escrow feature that ensures the safety of your transactions.
Creating a Paper Wallet
Creating a paper Bitcoin wallet is a fast and easy way to get your coins into cold storage. Make sure that you are using a reputable platform for creating your wallet, and make sure that the printer you use to print your wallet is offline to prevent hackers from gaining access to your wallet through it.
Be Smart, Be Safe, and Spread the Love!
No matter what kind of wallet you choose to use, there are some “good hygiene” practices that any Bitcoin holder should abide by.
Never. Ever! Show your private keys to anyone. You never know who could be watching. There was a famous incident in 2013 in which a Bloomberg anchor briefly flashed his Bitcoins’ private key on live television during a “12 Days of Bitcoin” holiday special. He was robbed within minutes. Luckily, the thief contacted the anchor and returned his coins (worth only US$20 at the time) with a slap on the wrist.
Make sure that you are sending the right kind of cryptocurrency to the correct address. Wallets that support several types of cryptocurrency (i.e., Exodus) have separate wallet addresses for each separate type of cryptocurrency. Sending the wrong kind to the wrong address could result in the loss of your coins.
When possible, keep multiple backups in multiple secure locations. You never know when misfortune could strike, and you could temporarily lose access to your crypto. Be proactive, and spread those backups around (for paper backups, a single one could even be cut into slices and placed in different locations).
Lastly, be good to other people. There are a lot of newcomers to the world of crypto, and not all of them may be aware of the “rules of the road.” When you see someone that you know venturing into the world of crypto for the first time, provide them with the same resources that helped you become successful (like, for example, this article).
If you are new to the world of cryptocurrency yourself, we are continually adding further information to our extensive catalog of thoughtful guides and other resources. Subscribing to our newsletter is the best way to ensure that you never miss any valuable information. Spread the love, and spread the word!
Have you had experiences with any Bitcoin wallets? Knowledge is power! Leave a comment below and let the world know how things have been going–we only stand to benefit from sharing and discussing our personal experiences.