A useful guide on ways to Store Bitcoins
Choosing a wallet that suits you to store your Bitcoin earnings
Bitcoin wallets can store personal keys that you require to retrieve your funds from a specific bitcoin address. There are various types of wallets to store Bitcoins on various devices. Safe guarding your bitcoin wallet is important like any other personal account.
Wallets to store Bitcoins
As you may already know, unlike normal cash which are stored physically, cryptocurrencies are stored digitally. What Bitcoin wallets actually store are the digital private keys. The 5 main types of wallets are; desktop, mobile, hardware, web and paper.
There are various desktop wallets tailor-made for different requirements. A bitcoin client can create bitcoin addresses for virtual currency transactions and store the private keys (eg: Bitcoin Core). Some wallets can run on multiple operating systems (eg: Multibit). There are OS X wallets that can connect to the app store and bitcoin services (eg: Hive).
Some desktop wallets have focus on special features such as enhanced security (eg: Armory) and anonymity (eg: DarkWallet).
Mobile wallets come in the form of an app in your mobile device. If your mobile device has NFC (Near-Field Communication) technology, you can tap your mobile against a reader to make a payment in bitcoins. The mobile clients do not download the whole blockchain as it is not practical. Instead the device only downloads a partial set and connect to other nodes in the network to validate information. There are android-based, apple-based, mobile browser-based and even smart watch-based mobile wallets at present.
These contain electronic private keys and can store bitcoins for transactions. There are few hardware wallets like Trezor hardware wallet, Ledger USB wallet and KeepKey hardware wallet currently in the market.
Web-based wallets are stored on websites that can be accessed from any device or location. These online wallets are useful if you are comfortable storing your keys on a website run by a company.
Coinbase, Blockchain, Strongcoin, Xapo and Circle are some of the reliable and well-known online web wallets.
There are paper bitcoin wallet services that create a printable version containing two QR codes. One QR code is the public address for doing transactions and the other is the private key.
The advantage of a paper wallet is the security from any type of cyber-attack or digital failure as they are based on paper.
Safety of Bitcoin wallets
The safety of your bitcoin wallet depends on how you safeguard your personal keys. The keys are the only way to access the bitcoin transaction data from a specific address. So, it’s important to keep the private keys secure and not to lose them.
Anonymity of Bitcoin wallets
Even though bitcoin is anonymous, the records are fully trackable and transparent. But, there are few wallets that focus on the anonymity of financial privacy (eg: DarkWallet).
Securing the wallet
There are several recommended ways of securing the wallet.
- Encrypting using a strong password on your wallet.
- Creating a complete backup copy of your wallet. It is important to back up the whole wallet, and not just the private keys in it. This is because some addresses are not visible by default.
- Creating a ‘cold storage’ wallet to store the personal keys offline. This will give you security from online hackers.
- Using a multisig allows you to have two-factor authentication. When multi-signature transactions are set on an address, you can define a number of signatures that are required to access the address. So, multiple users have partial private keys to an address. If you want to access the bitcoin stored in it, you need to give in the minimum required number of signatures out of those users who have access to that address.