Just bought your first bitcoins? Then you would want to keep them safe. Just like fiat currency can be counterfeited, digital currencies like bitcoins, have their own enemies. From hackers to malware, the last thing you want is for your hard-earned investment to disappear.
Luckily, you have a couple of good options to store your bitcoins. From desktop, mobile, to even paper storage, here are the pros and cons for each alternative.
5 Main Ways To Store Your Bitcoins
Once you have bought bitcoins, you’d be presented with two important details:
1) a public address for sending and receiving bitcoins, AND 2) private key(s) to allow you access your bitcoins as well as sign transactions.
These are stored in your bitcoin wallet. It’s of utmost importance that you a) choose a secure wallet, and b) backup your details in case of emergencies (i.e. hacking or lost access).
1. Desktop Wallets
Although a bit complex than other wallets, this is a good option as it gives you complete control of your bitcoins. You will need to download the required software directly in your computer before using it. The most popular desktop bitcoin wallets include:
- the original bitcoin client Bitcoin Core;
- Hive, which is OS X-based; and
- Armory, a platform that offers more security using multi-signature transactions.
The downside though, is that desktop wallets are not exactly the most secure or most accessible.
As you will need your personal computer to access your bitcoins, you may have trouble transacting on the go. Also, despite security protocols on the chosen platform, as a user, you will need to create your own measures to ensure your bitcoins are safe. This involves using updated malware and anti-virus software.
2. Mobile Wallets
For people always on the go and who want to transact using bitcoins at the touch of a key, then mobile wallets would be perfect for you.
These are usually in the form of apps that function on your smartphone or tablet. More advanced mobile wallets for storing bitcoins can also be used for smart watches. The best part is that some smartphone models can use NFC (Near Field Communication), allowing you to make faster, more secure bitcoin transactions with no need of an internet connection.
Some good examples of mobile wallets include:
- Blockchain, available for Android and iOS;
- Samourai, a new app featuring anonymity and high-level encryption (currently on alpha version);
- Aegis Bitcoin Wallet, which supports Android smart watches.
Storing your bitcoins on mobile wallets though, means less control for you as a user. As they can’t hold the entire blockchain (unlike desktop wallets), they rely on trustworthy nodes in the bitcoin network to make sure they have the right information.
There’s also the chance of you losing or breaking your device. If you haven’t backed up your private keys – or your mobile wallet hasn’t either – you could be in trouble.
3. Online or Web-based Wallets
Online wallets are perhaps one of the simplest bitcoin wallets for beginners and seasoned users alike. They hold your public address and private keys on the cloud, or on another computer controlled by someone else. This makes information readily available anywhere, and on any device.
The most popular online wallets to help store your bitcoins are:
- Coinbase, a platform with a worldwide user base;
- Circle lets you send existing bitcoins in your account as easily as an SMS;
- Xapo is great for sending, receiving, and converting funds in any currency around the world.
The downside is that, as your private keys are online or on another person’s computer, you might lose your bitcoins or get your account compromised if security isn’t implemented properly.
That’s a scary thought. Should you choose to store bitcoins this way, it’s advised that you carefully select a platform and backup your private keys.
4. Hardware Wallets
One of the best – yet somewhat more expensive – options is to invest in a hardware wallet. Unlike desktop wallets, hardware wallets are not prone to viruses or malware because you can’t put other software in it.
More advanced versions also allow bitcoin transactions even without an internet connection. It doesn’t need any other data either, so your transactions are anonymous. Plus, they’re portable. Here are a few hardware wallets for your bitcoins:
- KeepKey secures not only bitcoin, but also ethereum, litecoin, dogecoin, dash, and namecoin;
- Ledger Wallet uses smartcard security and is more affordable than most hardware wallets;
- Trezor is recommended for those with a substantial amount of bitcoins they need to keep safe.
If you’re trying to save money, hardware wallets can be costly. Unlike mobile apps or downloading Bitcoin Core, they’re not free. However, you can sleep soundly at night knowing your private keys are well, kept private.
5. Paper Wallets
If you can’t afford hardware wallets, you can still store bitcoins securely using paper wallets. These can be generated online using paper bitcoin wallet services. These don’t cost much and still allows you to store your private keys offline.
In essence, a paper wallet has two QR codes: one for your public address (to send and receive bitcoins), and the other for your private keys (to sign your transactions). If implemented well, you can rest easy knowing your bitcoins are safe from everyday cyber attack attempts and regular hardware failure.
Naturally, the downside is if you lose them. So make sure you keep them in a secure spot!
BONUS: Physical Bitcoins
Although physical bitcoins are not new (some services have been introduced since 2013, and the idea behind them has been discussed as early as 2010), many companies that used to offer these services are either out of business, or discontinued.
But if you’re interested in this form of storing bitcoins, it has its own advantages. For one, physical bitcoins act just like cash in that they allow anonymous transactions. This means you can exchange bitcoins without a trace (unlike direct deposits, money transfers, or credit cards).
Second, they also offer high levels of security, much like hardware wallets. Denarium for example, is a Finland-based company that sells physical bitcoins offering hologram sticker security. You remove the hologram sticker when you are ready to make a transaction (like spend or transfer bitcoins). The sticker itself has several layers of protection, making it difficult to counterfeit without leaving visible traces.
Third, physical bitcoins are collectible, much like art. If you’re a bitcoin fan, you can get a small sum of your invested bitcoin in a beautiful coin box for display, or to pass on to heirs. Or simply have physical bitcoins (that don’t contain actual bitcoin values) made for display in your home or office!
Wherever you decide to store your bitcoins, always remember to a) back up your details, such as your private keys, b) create strong passwords, and c) use services that support multi-signature transactions.
Avoid putting everything into one basket! Keep in mind that digital currencies such as bitcoin are a hot commodity today. Do what you gotta do to keep yours safe.