How to Store Bitcoins

How to Store Bitcoins

You probably use a wallet to store your US Dollars.
You probably keep some credit cards in there as well.
And, you may even keep some personal identification in there too.
Wallets make it easy to access and use your US Dollars.
You will use a digital wallet to help you access and use your Bitcoins.
If you are using an exchange, your coins are in their wallet!
Having your own wallet reduces your risk of losing your coins to a hack.

What is a Digital Wallet?

A Digital Wallet is:

– Your personally controlled interface to the Bitcoin network

– equivalent to a bank account or leather wallet

– generates your private keys and public coin addresses.

– stores your private keys and addresses, not your actual coins

– allows you to spend your coins privately

– allows you to provide a public address so you can receive coins

– optionally, keeps track of your spending and depositing

– has a secure backup that can recreate your wallet on almost any other Bitcoin wallet software

Why Do I Need a Digital Wallet?

You need a digital wallet to safely store your Bitcoins.

Here’s why:

– You control your keys and coins – nobody else!
– Must have a wallet to spend (not trade) coins
– Must have an address to receive coins
– Gives you backup recovery in case your wallet is lost.

What Kinds Of Digital Wallets Are There?

Hot/Software Wallet

– Available for Desktop, Web-based, or Mobile Phone
– A Full Node Wallet contains a Bitcoin Node so you can help secure the network
– SPV Wallet runs and synchronizes quickly but does not contain a Bitcoin Node
– Open source wallets are considered more secure than closed source or proprietary wallets because they have been (theoretically) peer-reviewed

Cold/Hardware Wallet

– A hardware wallet is a physical device like a dongle
– Its sole purpose is to secure your keys
– It must be connected to your computer to use
– It generates your Private Key offline to prevent theft
– It has a simple interface included for sending/receiving coins and also interfaces with most desktop wallets and some exchanges
– It also protected from computer-based malware, viruses and phishing attacks
– It is considered most secure because it is not internet connected

Paper Wallet

– Paper wallets are printed out secretly and then loaded with Bitcoin
– They are considered very safe from online theft but at risk due to physical damage in some cases
– Paper wallets are generally for single use long-term storage

Where to Get a Digital Wallet?

There are almost too many digital wallets out there to list.

bitcoin.org has a long list of digital wallets

These are the digital wallets I use and trust.

Electrum is my desktop wallet. Electrum is an open source wallet and has been peer-reviewed many time. It is also an SPV wallet and does not contribute to Bitcoin network security nor does it validate my own transactions like a Bitcoin Full Node would

I do have a Full Node Wallet to improve Bitcoin Network security but I don’t send and receive many Bitcoins from that wallet.

I use a Ledger Nano S for my hardware wallet.

I encourage you to DYOR and select the digital wallet that best meets your needs.

OK, Now What?

You don’t really need a wallet for small amounts of Bitcoin that you purchase and keep on a reputable exchange.

What is a small amount? I don’t know – that’s up to you. If an exchange were hacked, how much would you be OK losing? Are you willing to pay the fees to move your Bitcoins from the exchange to your digital wallet?

You do need a digital wallet if you want to spend your Bitcoins privately. Spending your Bitcoins directly from an exchange leaves a KYC/AML trail. Spending you Bitcoins directly from your digital wallet does not leave this trail. Your Bitcoins transaction will still be publicly visible on the blockchain but requires a great deal of computational power to backtrack Bitcoin transactions. Even then, relating a Bitcoin address to your location or personal identity is not guaranteed unless you’ve published your wallet address.

You do need a digital wallet when you start to worry about your Bitcoins on an exchange.

You need a hardware wallet when you start to worry about your Bitcoins on your computer.

The Extras

The Rules of Bitcoin

  1. Always talk about Bitcoin.
  2. Never talk about Your Bitcoins.

Buying Bitcoin

Coinbase Referral Link
Coinbase

Digital Wallets

Electrum Wallet
Bitcoin Core Wallet & Others
Ledger Nano S Hardware Wallet

Links

Why Bitcoin Works by Jimmy Song
A Guide To Bitcoin’s Technical Brilliance (For Non-Programmers)
Shelling Out | The Origin of Money by Nick Szabo

Podcasts

Unchained | Laura Shin – Blockchain 101 with Andreas Antonopoulos: How Bitcoin Makes Each of Us as Powerful as a Bank

PermaLinks

Mastering Bitcoin – Andreas Antonopolous
Curated Bitcoin Resources by Jameson Lopp
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