There are several ways you can store your Bitcoin, each have different pros and cons. Storing your Bitcoin properly is important to make sure that it doesn’t get lost or stolen. In many cases, if your Bitcoin is lost or stolen, there is no recourse, and thus it will be gone forever. For this reason, you should make sure to always store your Bitcoin safely. The main Bitcoin storage options are:
Hardware wallet
Hardware wallets are physical devices a bit like a USB key that allow you to store Bitcoin and other crypto on them. To get the Bitcoin onto these devices, you plug them into your computer and transfer them to the wallet using the wallet’s native software. After you move the Bitcoin onto the hardware wallets, you can store them anywhere. These wallets are password-protected, meaning that even if someone finds or steals your hardware wallet, they will still need the password to access the crypto. Don’t forget your password!
Examples of Bitcoin hardware wallets include:
The Trezor wallet is one of the most popular hardware wallets available to cryptocurrency holders. This wallet has a solid reputation and provides an intuitive user interface. Trezor also has great customer service which is essential considering the fact that many people who buy Trezor wallets have never used a cryptocurrency hardware wallet before. Trezor gives you a recovery seed phrase that is 12-24 words long. This phrase can be used to recover your coins in the event that you lose your physical Trezor wallet, or damage it. Once you move your Bitcoin to your Trezor wallet and disconnect the wallet from your computer, your Bitcoin will be disconnected from the internet. This allows your Bitcoin to be safe from hackers who operate on the internet.
Along with Trezor, Ledger is one of the top Bitcoin hardware wallet brands. Ledger wallets have earned a reputation for being secure and reliable. They are also made with strong materials such as stainless steel, which makes them more resistant to being damaged. Many people view this added strength as a key advantage. Like the Trezor wallet, Ledger wallets give you a recovery seed phrase when you first use the wallet. You can use this phrase to recover your coins if you lose your Ledger wallet. Ledger has a number of models available for sale including the Ledger Nano X and the Ledger Nano S. If you are going to buy a Ledger wallet or a Trezor wallet, buy directly from the manufacturer. If you buy from an intermediary, there is no way to guarantee the wallet has not been infected with malware. This is why it is safest to buy directly from the manufacturer.
Desktop / Mobile Wallet
These wallets are applications that you can download onto your computer or mobile device. Once the application is downloaded, you can send your coins from the exchange you bought them on to the wallet. These wallets are extremely convenient and can allow you to easily store your Bitcoin on the devices that you regularly use and have access to. Many of these wallets are password protected too, meaning that even if someone gains access to your phone or computer, they will still need the password in order to get into the wallet and access the Bitcoin.
Third-party Website Wallet
Typically, exchanges such as Coinbase, Gemini, Kraken, Binance, etc offer Bitcoin wallets on their sites. These wallets are extremely convenient. But, some people believe that they are not as secure as other options, such as hardware wallets. Oftentimes, these third-party websites put security measures into their crypto wallets, such as 2 or 3-factor identification and time delays for transactions. For example, Coinbase has a security option called “vault storage” which allows you to transfer Bitcoin to a wallet that has a 48-hour wait period for withdrawals and requires verification from a phone and two different email addresses. Features like this help to amplify security.
Custodial Solutions
These tend to be for institutions or for individuals looking to safeguard large amounts of crypto. They are typically insured against loss or theft up to certain amounts. There are now a number of high-level Bitcoin custodial services for institutions. Companies such as Fidelity, BitGo, Coinbase, and Gemini offer Bitcoin custody. If you are a high-net-worth individual or if you are representing an institution, then Bitcoin custodial solutions could be the right option for you.
Which Bitcoin Wallet is Right for You?
Hardware wallets put you in full control of your funds. But with that control comes responsibility. It is up to you to keep those funds safe. You will need to protect the physical security of the hardware wallet and you will need to make sure that the hardware wallet is not lost or stolen. You also cannot forget the password. A number of people have lost ample amounts of Bitcoin by forgetting passwords or losing hardware wallets.
On the other end of the scale, keeping your bitcoin on third-party websites is low-hassle but means you have far less control over your funds. Can you really trust that third-party to look after your funds? What if they get hacked, or go out of business? There have been some cryptocurrency exchanges that have been hacked. In fact, Mt. Gox, the most prominent crypto exchange in the early days of Bitcoin had 850,000 Bitcoins stolen from it. There is a much greater amount of security nowadays on large cryptocurrency exchanges. For example, companies like Coinbase and Gemini keep the vast majority of their Bitcoins stored in cold storage, which is not connected to the internet and is therefore immune to digital hacks. However, occasionally, crypto exchanges still suffer security breaches.
The best solution will be down to the individual preferences, amounts of funds involved, and the required ease of access to the funds. Just like any form of money, you may keep small amounts in a less secure, easy-to-access place for everyday use, but keep larger amounts stored away somewhere safer. It is definitely wise not to store all of your Bitcoin in one place, just in case that place becomes compromised.