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How to Store Bitcoins?

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21 hours ago

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Think about having Bitcoins and planning what to do with them. You might invest them later on, you might sell some to buy something, or you’ll just leave them until they grow. Whatever the case, you feel safe in knowing you have them. 

Now, imagine waking up and all your Bitcoins are gone. Poof, just like that. That’s not some wild story, it’s a real nightmare that has already happened to countless people who didn’t take Bitcoin storage seriously. If you own it or plan to buy some, you have to know how to store it properly because you’re always just one hack away from having it all taken from you. 

There’s also good news. Keeping Bitcoin safe isn’t complicated and there are several options to choose from. 

If you’re ready to make sure your Bitcoin stays yours, keep reading.

What Is a Bitcoin Wallet?

If you want to own Bitcoin (BTC), then you’ll need a place to store it. What you need is a digital wallet, or a Bitcoin wallet as some call it. If you’re looking to learn about Bitcoin ownership, it’s quite essential to understand crypto wallets – what they are and how they work. So let’s do that.

That wallet doesn’t actually contain any physical coins, but rather digital information that enables you to access your coins on the blockchain. The way this works is actually pretty simple – you have a private key and a public key.

The private key is what you keep to yourself. The private key allows you access to your digital funds; without it, you lose that access forever. So, don’t lose it! And keep it safe.

The public key is your wallet’s address. It tells others where your wallet is, and if you want to receive Bitcoin, you’ll need to share your public key address/key; never the private one.

Crypto wallets come in two types – digital software OR physical gadgets (think USB drive). Next, we’ll dive into just that!

Types of Bitcoin/Crypto Wallets – Crypto Storage

There’s not just one Bitcoin wallet out there; there are several of them to choose from. If you want to keep your Bitcoin safe, you have to understand what makes each of them work.

First, you have non-custodial wallets and custodial wallet options. With non-custodial wallets, you have total control over your Bitcoin and private keys, which makes them a safer option for people whose priorities are privacy and security. 

On the other hand, a custodial wallet is managed by a third party, like a crypto exchange, which holds your private keys for you. 

Then you have the whole debate on whether to use a hot or cold wallet. A hot wallet is connected to the internet, making it prone to hacking. 

A cold wallet, however, keeps your Bitcoin offline, and it’s much more secure. 

You may have also heard the term entire wallet being used and that refers to a broad range of solutions you can pick from, including both software and hardware wallets. A crypto wallet can be an app on your phone, a program on your computer, or even a specialized hardware device. 

If you want maximum security, a cold storage wallet is usually the best choice. 

Hot vs Cold Wallets – What’s the Difference? 

When you think about storing Bitcoin, the biggest decision you’ll face is whether to use a hot wallet or a cold wallet. 

Here’s an overview of both types. 

Hot Wallets

Hot wallets are digital wallets and they’re always connected to the internet. This makes them very convenient for everyday use. They’re popular because they give you quick access to your Bitcoin, which is perfect if you make transactions frequently. 

Examples of hot wallets are crypto trading platforms (exchanges), custodial hot wallet services, and different options based on software like centralized crypto exchange platforms, online wallets, mobile wallets, and web wallets. A lot of people use mobile devices to get access to those wallets, which makes handling digital assets or crypto assets super easy. 

But just because they’re convenient doesn’t mean they’re perfect. This convenience comes at a cost. Since hot wallets are online, they’re vulnerable to hacking and other cyber threats. That’s why it’s so important to keep your wallet’s private key safe. 

If you don’t, you risk losing your funds in an instant if someone gets their hands on your keys. And you might think that’s something that happens to other people, but how much are you willing to bet that everyone thinks that way? Especially those that were robbed of their assets. 

Cold Wallets

A cold wallet is the complete opposite of a hot wallet and it keeps your Bitcoin completely offline (which is what you want). This method is known as cold storage and it’s much more secure because it eliminates the risk of online attacks. Instead of being online, cold wallets store your Bitcoin on hardware devices or even paper, so they’re almost impossible to hack, and this is their main advantage. 

Of course, there’s a downside to consider, as well. If you want to access your funds, you’ll need to jump through more hoops compared to hot wallets, which can be quite annoying if you make transactions all the time. But if you plan on holding on to your Bitcoin for a while or if you’re just all about safety, no matter the inconvenience, a cold wallet is your best bet by far. 

How to Securely Store BTC? – Wallets

The perfect wallet is a balance of security and convenience. Naturally, that means something different to everyone, so let’s go over your best options. 

Hardware Wallets (Cold Wallets)

As previously mentioned, this is your safest option, although it’s not the most convenient. Hardware wallets are designed for crypto storage and they keep your wallet address and public key offline so online threats can’t touch them. 

When you first set it up, you’ll receive a recovery key/seed phrase. This phase is a crucial backup that allows you to restore access to your Bitcoin if your device is lost or damaged. When you buy BTC and you want to store it for the long haul, transferring it to a hardware wallet is most often your best choice. 

Just remember that, if you lose access to your recovery phrase, you lose access to your Bitcoin. 

Paper Wallets (Cold Storage Wallets)

If you want to keep things simple and offline, a paper wallet is a good option. It’s literally a piece of paper that has your wallet's public address (key), along with the private key you need to access your funds. And since it isn’t internet-enabled, it’s protected from online threats. 

But the process of generating a paper wallet has to be done carefully. It’s best to do it on an offline device free of any kind of malware to avoid potential attacks. Once it’s created, your paper wallet should be stored in a safe place where it can’t be physically damaged. 

Keep in mind, however, that this is not a very practical choice for regular transactions unless you don’t mind the extra effort. 

Software Wallets (Hot Wallets)

A software wallet is by far the most practical. It gives you quick and easy access to your Bitcoin and makes regular transactions a piece of cake. These wallets are digital apps you can install on your phone, computer, or even access through a web browser. They’re convenient, easy to use, and they’re very popular with people who regularly use their Bitcoin. 

But since they’re always connected to the web, it’s important to take some precautions. Make sure to use strong security measures like two-factor authentication (2FA) and regularly update your software to protect your wallet from hacking attempts.

You also want to keep your wallet address and public key safe because anyone who can access your private keys can steal your funds. Software/app wallets aren’t the most secure, but if you usually work with small amounts of Bitcoin, they’re safe enough if you take proper security steps.

Best Bitcoin Wallets for Different Uses

If you want to know what the best Bitcoin wallet is, you need to think about how you plan on using your Bitcoin. By now, you should sort of, kind of have an idea of which type of wallet might work for you.

Hardware wallets such as Ledger and Trezor were designed to keep your digital assets safe (especially if you plan on holding them for a while). This is due to their offline storage capabilities.

These types of hardware wallets support multiple cryptocurrencies, meaning that you can store more than one asset in the same wallet. This way, you don’t have to limit yourself strictly to BTC, but can rather diversify your investments and manage them all in one place.

If you’re a quick trader, and aren’t looking to HODL your coins/tokens, then an app wallet might be a better choice. This doesn’t refer strictly to trading crypto, but also any buy/sell transaction wherever crypto is accepted as a form of payment. Popular software wallets are Electrum, Exodus, Mycelium, etc. 

You, as previously mentioned, also always have the choice of offline storage or a paper wallet.

Basically, this comes down to how often you want to use your Bitcoin, how much of it you need to store, and how much risk you’re willing to take.

What Not to Do When Storing Bitcoin

If you make a mistake with Bitcoin storage, it could be a disaster, and many people have lost all their funds simply because they weren’t careful. 

Here are the most common (and the most dangerous) mistakes people make. 

Don’t Use Weak Passwords

This is probably the most common mistake people make because they don’t think anything will happen. But if your password is too simple or too easy to guess, hackers will need minimal effort to break into your account. You should always use a complex password that’s long and has a mix of letters, numbers, and symbols. It’s also a smart idea to use a password manager to keep all your credentials safe and organized.

A weak password is like leaving your house key under the doormat. You wouldn’t do it because you know it’s just a matter of time before someone finds it. 

Don’t Forget to Back Up Your Wallet

If you don’t back up your private key(s), you’ll be making one of the most catastrophic mistakes you can make. This is especially problematic if you’re using a hardware wallet, digital wallet, or even a paper wallet. 

If your device gets damaged, lost, or corrupted, and there’s no backup, your Bitcoin is gone. Forever. When you’re setting up a wallet, always remember to write the seed phrase or recovery key down, and store it somewhere safe and secure (seed phrase is also called recovery key/phrase, backup key/phrase, recovery key/phrase, and mnemonic key).

This is such a simple step but it makes all the difference between recovering your Bitcoin and losing it for good. 

Don’t Keep Large Amounts on Crypto Exchanges

Cryptocurrency exchanges are great for selling and buying Bitcoin, but they’re absolutely terrible for long-term storage. Even the most reputable exchanges can be hacked, experience technical failures, and even legal troubles that can freeze your assets without warning. Storing large amounts of Bitcoin on an exchange for extended periods is a recipe for disaster. 

Make sure to always move your funds to a more secure storage option if you don’t plan on using them for regular transactions. Exchanges are convenient, but they’re a constant target for cybercriminals. 

Don’t Share Your Private Key or Seed Phrase

This should go without saying, but you absolutely shouldn’t share your private keys and your wallet’s private key with anyone, not even the people you think you can trust. Scammers are great at tricking people into giving away their private keys and seed phrases and they’ll even pose as official representatives to do so. 

If someone gets hold of your private key or seed phrase, your Bitcoin is gone within seconds. 

Don’t Trust Unknown or Suspicious Wallets

Since Bitcoin is so popular, there has been an increase in scams in the past few years and fake wallets are one of them. They’re designed to steal your Bitcoin the moment you deposit your funds. To prevent this, always do your research before you download or buy a Bitcoin wallet. 

Check reviews, verify official websites, and avoid anything that seems suspicious. A legitimate wallet will have a good reputation and positive feedback from its users, so be sure to check reviews, and check/verify official websites.

FAQ

What’s the Safest Cryptocurrency Storage for Bitcoin?

A hardware wallet or cold storage are the safest options. They’re connected to the internet only briefly, during transactions, so they offer maximum protection. But keep in mind that you’ll need to keep a backup of your seed/recovery phrase so you can get access to your Bitcoin if your hardware wallet is lost or damaged. 

Can I store BTC on a cryptocurrency exchange?

Yes. But… Exchanges are convenient and easy for trading, but they can be hacked, have issues with regulations, and can even get shut down. When you store your Bitcoin in an exchange, you’re not the one controlling your private keys; the exchange is. So, if the exchange gets hacked or if it freezes your account, you could lose your funds. 

What if I lose my private key or seed phrase?

You lose access to your Bitcoin. Permanently. Unlike a password that you can reset, private keys are the only way to access your Bitcoin. This is why it’s absolutely critical to keep both stored safely and backed up. 

Conclusion

For anyone new to Bitcoin, or crypto in general, all of this might be confusing at first glance. And that’s normal. But storing your Bitcoin isn’t really that complicated. Once you actually know what you’re dealing with and how it all works, it becomes the new ‘normal’.

The crux of it all is – take the right/precautionary steps and think of safety. Once your BTC is stored in a way that’s safe and sound, you’re free to HOLD it, or trade it around without worry.

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