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How To Store Bitcoins?

Published: 14/09/2018
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Up-to-date Blockchain and cryptocurrency news. Be the first to know!

What is it for?

Bitcoin is a cryptocurrency, so it does not have a physical form. In order to store his or her coins, a BTC holder uses a special wallet that contains a pair of keys — a public and a private key. The pairs are generated from a unique 12-word code phrase (seed) that every user has. If you have access to this phrase, you have access to your funds. You should never show your seed-phrase to anyone.

 

 Electrum Wallet. Seed phrase as a string and as a QR code

 

Public and private keys work in pairs. The public key is used as a wallet address, and the user receives money to it. The private key must be kept in secret.

 

A user can have several different wallets for different purposes. For example, to store cryptocurrency or to pay for purchases. There are different types of wallets with different levels of security.

 

Types of Bitcoin Wallets

 

Web Wallet

 

It is a good option for those who want to have access to their wallets through a browser from anywhere in the world as long as the Internet connection is available. This type of wallets is convenient and opens great opportunities. 

 

Examples are SpectroCoin, Blockchain.info, Circle, Xapo.

 

Vulnerabilities:

 

  • Insecure connection to the network and, as a consequence, a possible leakage of profile data (https issues).
  • The risk that user assets may be stolen or lost by the management of the website.
  • The loss of access to the platform or the website closure.

 

Mobile Wallet

 

A mobile wallet is an app for smartphones. This type of wallets is considered convenient, as it is always accessible. Mobile storages are preferred for those who keep a small amount of crypto assets and frequently make transactions. Examples are Bread, Green Address, Abra, and Airbitz.

 

Desktop Wallet

 

A desktop wallet is a software installed on a PC. The advantage is that a user can choose a wallet with an optimal set of functions and different levels of protection.

 

Transaction window in the Electrum desktop wallet

 

The most popular options are:

 

  • Electrum, a cross-platform wallet, also available as a mobile app. 
  • Bitcoin Core, an original software product, which requires to download the entire blockchain. Users must have at least 150 GB of free space on their hard drive.
  • Exodus, a wallet compatible with different operating systems, does not require downloading and storing entire Bitcoin’s blockchain.

 

Hardware wallet

 

This is a specially designed device that allows storing information in the encrypted form. A hardware wallet looks like a hybrid of a flash drive and a smartphone. The purpose of this device is to safely store a seed-phrase. It is considered secure thanks to not being connected to the internet all the time, thus minimizing risks of Phishing, Clickjacking, etc.

 

In order to perform a bitcoin transaction, a user needs to connect the wallet to the Internet through a USB port. Some wallets' brands allow confirming transactions offline. In this case, the transaction is confirmed in the wallet and then transferred to the computer with an installed hot wallet, either a desktop or a web. 

 

Advantages:

 

  • Private keys aren’t exposed to your computer.
  • No Internet connection.
  • Immune to viruses of your computer.
  • Pin adds another layer of security.
  • Mobility. Hard wallet are compact, so users can hide them or easily carry them around.

 

Particular attention should be given to the safety of hard wallets. Manufacturers of hardware wallets do their best to prove their products are the best by increasing their security level.

 

Physical protection

 

A hardware wallet case can be made of different materials. A titanium case is much more durable than a plastic one. Other brands offer waterproofness, etc.

 

Own operating system

 

This is a very important factor of protection. It is much more difficult to create malicious software to bring harm to a unique OS rather than to a well-known one, like Windows or Android. A good example is OS Ledger.

 

Among the most reliable hardware wallets are Trezor and Ledger Nano S.

 

Bitcoin Hardware Wallets from left to right: Ledger Nano S and Trezor

 

Paper Wallet

 

A paper wallet is considered the most reliable cryptocurrency wallet type. In the simplest form, this is a sheet of paper that contains an image of the code phrase itself in an explicit or encrypted form (for example, a QR code that can be read by a scanner or a mobile device). Of course, you do not necessarily have to use paper, as durable materials are more preferable. The main thing here is to ensure the safety of the wallet and not to lose access to it.

 

Vulnerabilities:

 

  • A printer used to create a paper wallet can be connected to other devices.
  • It can get damaged, lost, destroyed, or stolen.

 

A paper wallet is a type of "cold" storage, because it is used without the Internet connection. In order to ensure its safety, users store it in a secure place, such as a home safe or a safe deposit box.

 

Metal paper wallet

 

BitcoinPaperWallet is a service where you can get a paper wallet and choose additional options for its physical protection. You can generate and immediately encrypt a pair of keys with the help of BitAddress.org service as well.

 

Note: specific businesses mentioned here are not the only options available, and should not be taken as a recommendation.

 

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BTC Bitcoin wallet
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