The world has evolved so much in the recent years. New ideas keep coming to light especially in the financial sector. The rise of cryptocurrency gave birth to a whole new way of transacting money. The development of the Bitcoin in 2009 led to such changes. An anonymous developer by the code name Satoshi Nakamoto created the crypto. It centers its creation on decentralization meaning no authority governs by it. In short, they operate in the opposite terms as banks. The balance checks get controlled by powerful computing systems. Bitcoin took the world by storm despite not being a legal tender.
The value of the coin now stands at around 19,000 dollars seeing an increase of about 1400% from a mere 1000 dollars from 2017. Bitcoin is the first of its kind, and it uses peer to peer technology to grant its transactions. It does not resemble fiat money; meaning there is no physical bitcoin. That said, it leaves the puzzle on how one can store the tokens. You will learn that in the end, the method of storage comes down to a personal consideration by the findings.
Storage and Safety
Like with most other cryptocurrencies, you have to store the coin in a wallet. It acts as a safe or storage package for ones’ valuables and in this case that would be bitcoins. Wallets come in different forms and specific considerations that suit each user uniquely. To ensure the safety of your digital assets, you must adhere to several guidelines at all times. The forms of wallets include online wallets and hardware wallet. With the online resources, the wallet is easily accessible via the Web through any Internet device while the latter uses physical devices for storage. Other forms include paper wallets which involve storing private keys on a print, and software wallets which involve downloaded applications in the tablets, computer or mobile phone.
Issues to Consider Before Selecting a Wallet
Before choosing a particular wallet type, it is best to know about some considerations. The things to consider will enable you to choose the suitable form. The first thing you should consider is a model that uses combinations. This model utilizes the mix and match concepts to find the right combination of accessibility and enhancing the security protocol. Secondly, the number of bitcoins you possess could lead to a user opting for offline and hardware wallets which tend to be better when it comes to safe keeping. Thirdly, the frequency of payments will require that you have nearby access to your tokens if you make regular payment and that could mean using a desktop or mobile wallet. Lastly, for people making personal payments as opposed to online transactions then a mobile wallet could be a wiser decision since it will be readily available whenever it gets needed.
Types of Wallets
There are numerous types, and this topic will cover the main ones concerning their usage. Universal, mobile, desktop and online wallets are some of the models in the discussion. Universal Wallets
Bitpay created Copay and made it available for Windows, Linux, Android and iPhone operating systems. The availability of it on multiple platforms makes it convenient to use a single account on different devices. The application also has a trait that enables shared accounts for business purposes in that both parties will have to out their signatures to access the account.
The core purposes for these type of smartcards is to generate Bitcoin private keys while offline.
It is a smartcard kind of hardware wallet. The private keys will get signed and generated in the smartcard while offline. One has to write down a random 24-word seed made once it is set up. The seed’s goal is to recreate the wallets should something happen to it. To protect against hackers and thieves the user installs a PIN code to it.
It is a tiny computer that generates private keys while offline. It also embraces the use of the 24-word seed. The seed cannot get displayed on an online computer thus offers more security. The security detail can get enhanced by adding a passphrase to the seed. It will force an intruder to have both the seed and passphrase for them to access the funds. Unfortunately, the passphrase cannot get recovered once it is lost or forgotten.
Its the first Bitcoin Stick or Bitcoin Bearer Bond. Using the USB stick a user can spend bitcoins like pounds. It connects to many USB’s for checking balance and one uses it anytime for online spending. It can work on any phone, tablet or computer. The private key gets disclose to no one. The software’s making remain focussed on the fundamentals ever since Bitcoin got built. It also acts as a form of physical bitcoin which can get handed to different people on multiple occasions. The device also requires no mining fees as well as confirmation delays.
It is a wireless hardware wallet the size of a credit card. The private keys get generated offline. Transactions get sent to a phone through NFC after getting signed on the card. The device is an ideal recommendation for everyday use. Online Bitcoin Wallets
The types of wallets in this category see to it that the private keys get stored online and are only accessible via a user-set password.
The web wallet is available for Android, Chrome and iPhone operating systems. Only consider using this kind of wallet if you plan using strictly the above operating systems.
SpectroCoin is a multitasking application available for Bitcoin. It has numerous services that include exchange platforms to Bitcoin e-Wallet.
Mobile Wallets (Android)
The wallet is convenient for users who are new to the world of Bitcoin. A while back it was only available for iPhone, but now it is open even to Android users. It is a simple to use model.
Mycelium gets favored by core users of Bitcoin. The wallet has numerous features. The features include watch only accounts, Tor, hardware wallets Ledger and Trezor, and cold storage spending.
It was Android’s first bitcoin wallet. In addition to its simplicity; it uses SPV to connect directly to the Bitcoin market.
The mobile wallet is convenient for everyday use. Its integration with Fold means one can score a 20% discount when they shop at Starbucks. The accounts limit it to usernames and passwords by denying it access to funds. The account is suitable for people with less technical skills that get troubled with backing up.
Mobile Wallets (iOS)
The types of purses that support the operating system include
Bread wallet, Copay, and Airbitz.
These are the wallet software stored on the computer.
Though it is secure, mature and fully featured, its tech can get quite intimidating to people using it. Regardless of the amount you plan to store, it is probably the most secure application. The users get to be in complete control of the private keys, and they can create a safe offline signing process.
Although Bitcoin Core is the official Bitcoin wallet and client, many people stay clear of it due to its lack of features and slow speeds. Nonetheless, it’s a full node in that it does verifications and transmitting of other Bitcoins. It even keeps a copy of the whole blockchain. The privacy outcome is far much more significant. The best way to use Bitcoin privately is via routing Bitcoin Core through Tor.
Its ease of access and speed makes it very popular. With an extra computer, it can get used offline and as cold storage. It offers features such as assimilation with hardware wallets, connecting through Tor and multi-signature wallets.
This forthright desktop wallet offers support for TREZOR and KeepKey. Not many people use it; however, it is quite a safe option.
The paper wallet was the original cold storage method even before hardware wallets. Paper wallets are merely paper prints containing private keys. It the generation gets done with an offline computer that is secure then the wallet can be secure cold storage. The downside, however, is the fact that one needs to print new portfolios every time they need to cold storage funds.
Storage of Bitcoins Further Explained
The types of Bitcoin storage can get split more also into several categories. The four main groups are hot wallets, cold storage, custodial services, and multi-signature wallets.
Hot wallets imply the Bitcoin wallets that get used on internet usage devices such as computers, tablets or phones. Since the wallets depend on internet connection; the risk of theft is ordinarily high. Just like your pocket wallet, it is not advisable to store a substantial amount of bitcoins in them. A user should seek to use hot wallets only for their everyday use. One can save away 20,000 dollars’ worth of tokens while having only 100 dollars in their purse for expenditure.
To archive cold storage, one has to create and store Bitcoin private keys offline. Offline storage increases the security around your coins since it is hard for malware or a hacker to steal them. The three ways to make cold storage are through offline software wallets, hardware wallets, and paper wallets. It is more like a savings account of tokens you do not intend on spending.
Some wallets get considered as custodial. The reason for such considerations is that the private keys are in the possession of a third party. The user does not exercise autonomous control over their coins. Just like in the extreme case of the Gox incident, where users had over 800,000 bitcoins in their account. The company claimed to gotten robbed and account holder got robbed of their funds. There is always a risk factor involved in storing private keys with a third party.
It enables multiple parties to control a single account. Using an offline cold storage method will increase the security of the bitcoins. To spend the funds in an account, several signatures are required. Examples are the 2-2 or 2-3 types in which the former means both two holders must sign and the latter being at least two holders among the three can authorize the spending of funds.
Security Measures Involved in Storing Bitcoins
The fact that the cryptocurrency does not have a governing authority and the history of theft surrounding it means that some security measures are a necessity. Some of the protocols include the ones listed below.
Keeping Your Private Keys a Secret
Never share your private keys with anyone. To elaborate further, it could mean avoiding the likes of online wallets and hot wallets. Online wallets keep private keys on their servers making them vulnerable to hacking. Hot wallets, though convenient for small token usage, should not be a go-to method of storing large sums of bitcoins.
Emulate the use of cold storage generated by offline means. To achieve that, you have to use paper wallets, USB devices, offline Hardware wallets, and bearer items.
Have Several Backups
Making many backups for wallets is safe. Keep the backups in different locations in case of theft or fires. It is good practice to laminate paper wallets or engrave them on metal sheets.
Separate Your Funds for Expenditure
Keep your money separated by several wallets. Do not store all your bitcoins in a single wallet. Use different kinds to cater to your daily needs and savings.
Use Different Addresses
Keep yourself anonymous by incorporating the use of different addresses. Each transaction of Bitcoin develops a new address automatically. Due to the Bitcoin transactions being public avoid reusing addresses since people may pinpoint your identity.
Protect Your IP Address and Privacy