One of the biggest issues with Bitcoin is storage.
Since the value of Bitcoins has increased significantly over the years, the number of cyber criminals intent on stealing them has also gone up.
Although the blockchain technology that underpins Bitcoin is very secure, this remains a weak point for the cryptocurrency.
As cryptocurrency becomes more popular, the people who are trying to steal it are becoming more sophisticated.
They are creating bots that scan online Bitcoin wallets and try to remove the Bitcoins in them.
There have been several reports of cyber criminals emptying cryptocurrency exchange wallets over the years and the wallet holders never seeing their Bitcoins again.
You need to be concerned by this if you’re going to be a successful Bitcoin investor. It’s essential that you hang on to your Bitcoins and keep them safe.
Fortunately, there’s a lot you can do to ensure this.
The type of Bitcoin wallet you choose is crucial to the security of your Bitcoins.
The most important thing to remember about Bitcoin is to keep your private key safe. Your Bitcoins are associated with an address that consists of both a public and a private key.
The public key is the address of the Bitcoin, and the private key is the password that unlocks it. If you ever lose your private key, you’ll lose access to your Bitcoins forever.
If a cyber criminal gains access to your private key, they can transfer all of your Bitcoins to other accounts. Once a Bitcoin transaction is verified and confirmed, it cannot be undone.
If you’re unlucky enough to have Bitcoins stolen from your wallet, you just have to accept it and move on. There’s nothing you can do to get your Bitcoins back.
So lets dive into the various types of wallets and how they can enhance the protection for your private key.
The Types Of Bitcoin Wallets and Which Is Best
1. Online Bitcoin Wallets
There are a few different ways to get started with Bitcoin investing, but setting up an online wallet is by far the easiest method.
You don’t need to have any Bitcoins to get started as most cryptocurrency exchanges (like Coinbase) will provide you with an online wallet when you create an account.
Another option is to create a wallet at Blockchain.com.
When you first start out, an online wallet is a good option to use. However, you wouldn’t want to keep a large Bitcoin inventory in an online wallet.
While it’s convenient to be able to access your online wallet from anywhere in the world, so can thieves and cyber criminals.
A “hot” wallet is one that works with an internet connection. The downside to hot wallets is that if the server storing your private keys is hacked, you could lose your Bitcoins.
The other issue is that servers can and do have technical problems and if they suffer a catastrophic issue, your private keys could disappear forever.
Some online wallet platforms limit or suspend accounts for terms of service infractions, and you may even have your account shut down permanently, losing your private keys.
It’s best to move your Bitcoins to an offline cold wallet if you own a significant amount. By doing so, you maintain control over your Bitcoins and avoid the risk of losing them.
Although online wallets may have some security risks, they can be useful for making frequent Bitcoin transactions. You can hold a small amount of Bitcoins in your online wallet for regular transactions and then move the rest to a more secure wallet.
2. Mobile Bitcoin Wallets
A mobile wallet is just like a hot online wallet, but you can access it through your mobile device when you’re connected to the internet.
So, if you’ve got a smartphone or tablet that you take with you everywhere, a mobile wallet is a very convenient type of Bitcoin wallet.
A mobile wallet lets you make Bitcoin payments to a vendor either online or offline. For example, if you have a Blockchain.com or Coinbase online wallet, there’s a mobile counterpart that’s synchronized to your main wallet.
There are some security concerns with mobile wallets even though they are very convenient.
Your private keys could be compromised if they are stored on your mobile device or on remote servers. Cyber criminals and hackers could gain access to them and cause some serious problems.
Your mobile phone is a potential target for theft and loss. If you don’t have a backup of your private keys, you could lose your Bitcoins.
It’s generally recommended to transfer only what you need to your mobile wallet from a more secure wallet for the best results. This way, if you lose your phone or it becomes unusable, you will still have your private keys safely stored in the secure wallet.
3. Desktop Computer Bitcoin Wallet
If you’re looking for a more secure option, a desktop wallet might be a better choice for you.
With this type of wallet, you download an app to your computer or laptop and store your private keys there, rather than using an online or mobile wallet.
Bitcoin Core is a popular desktop wallet, but it’s not the most practical choice.
The thing is, Bitcoin Core will actually download the complete blockchain, so you will need at least 150 GB of spare disk space to make this work. If you don’t have that much space on your computer, you can try a different wallet.
There are desktop wallets available that do not require downloading the blockchain for Bitcoin. These wallets use simple payment verification (SPV) technology.
Desktop wallets are great for people who are new to cryptocurrency and want to keep their coins safe.
They are simple to use and much safer than online or mobile wallets. By disconnecting your computer from the internet when you use a desktop wallet, you prevent hackers from accessing your private keys.
An online wallet is more convenient, but a desktop wallet gives you control over your private keys. If your laptop or computer is stolen or becomes inoperable, you can also make a backup.
4. Paper Bitcoin Wallet
Paper wallets are an interesting option for storing your Bitcoins, even though it may seem like an odd match.
After all, paper is not a very good conductor of electricity.
However, paper wallets are a form of cold storage, which means that it would be impossible for even the most competent cyber criminals to hack a piece of paper.
If you choose to use a paper wallet, be sure to take care of it and keep it safe from potential thieves and damage. Store it in a water-resistant container to protect it from the elements.
Paper wallets are not as convenient as online wallets, but they are a lot safer.
To create a paper wallet, you only need to print off your private and public keys and store the paper in a secure location, such as a safety deposit box.
Paper wallets are a good long term option for storing large amounts of Bitcoins. Having a few Bitcoins available in an online wallet for regular transactions is also a good idea.
5. Hardware Bitcoin Wallet
The most secure types of Bitcoin wallets are hardware wallets, according to most Bitcoin experts.
If you’re serious about Bitcoin investing, we recommend investing in a hardware wallet. They’re not cheap, but they’re worth it.
Most hardware wallets will allow you to store other cryptocurrencies in addition to Bitcoin. Hardware wallets typically come in the form of a USB stick that you insert into your computer when you want to make a Bitcoin transaction.
Once you’re done, just remove the hardware wallet and store it safely.
A key security feature of hardware wallets is that private keys can be generated offline. This means that users can carry their hardware wallets with them without worrying about having their private keys stolen.
A hardware wallet is a great way to keep your Bitcoins safe.
Most hardware wallets have a password and PIN code, and you can even add recovery seed words to help you recover your Bitcoins if you lose your hardware wallet or it stops working.
You should always keep your security details for your hardware wallet in a safe place, in case you forget them. If these details were to fall into the wrong hands, you could lose all of your Bitcoins, so it’s important to be careful.
A hardware wallet is much less likely to be hacked than a software wallet, so the only thing you have to do to keep your coins safe is make sure you keep a reliable backup of your security details in a dry and safe place.
Different types of wallets serve different purposes. It’s a good idea to use a combination of different wallets as you become a more serious Bitcoin investor.
Hardware and paper wallets are the best choice for long term storage. You can use a desktop wallet for medium term storage and an online wallet for those frequent short term Bitcoin transactions.