“Not your keys, not your coins!” That’s popular and venerable saying in the Bitcoin world. But it’s true.
If you have Bitcoin stored on an exchange, you really don’t own it. While it’s in your account, you don’t have control over your keys. So if something happens to your exchange (think Mt. Gox), or your account gets frozen or your government decides to make a change or the exchange gets hacked, your coins are gone or could be gone.
So what do you do? You move your keys to a wallet. You need to hold your own private keys!
There are several different types of wallets that can be used to store Bitcoin, each with its own advantages and disadvantages.
Desktop wallets
Desktop wallets are software programs that can be downloaded and installed on just about any desktop computer. These wallets store the private keys needed to access your Bitcoin.
Electrum and Exodus are some of the popular ones. These wallets are typically free to download and use, but some may charge a small fee for additional features or support.
Desktop wallets are best suited for those who want to store large amounts of Bitcoin and do not need to access their Bitcoin on the go. However, because desktop wallets are stored on a single computer, they can be vulnerable to hacking or malware attacks if the computer is not properly secured.
PCs are massive targets for malware, viruses, etc. And since you are often connected to the internet, these wallets are considered “Hot Wallets”. Meaning they and it’s keys could be accessed (read: hacked) by a third party since they are connected (or Hot).
Mobile Wallets
Mobile wallets are apps that can be downloaded onto a smartphone or tablet. These wallets allow you to access your Bitcoin on the go and are typically more user-friendly than desktop wallets. Mobile wallets store your private keys on your device. And because they are on your phone, it’s arguable they are more secure than your desktop which is more prone to hacks and viruses.
Muun and BlueWallet are popular picks for iPhone and Android based phones. But don’t put too much in there. Think of it like how much you would keep in an actual wallet, maybe more.
And if you lose your phone or it should get damaged, don’t worry. You keys can be restored from the same app on your next phone.
Some of these wallets can also store other cryptocurrencies.
Like their desktop counterparts, mobile wallets are also “Hot Wallets”. So be careful. And since they based on an app, be mindful that the app could become outdated and removed, and then what?
Hardware Wallets
Hardware wallets are physical devices that store your private keys offline, making them the most secure way to store Bitcoin. These wallets are typically small and compact, making them easy to transport, and connect to your computer or mobile device via USB. They are like holding a bigger USB stick in your hand.
These are often referred to as “Cold Wallets”. Implying they are not connected to the internet so no one can hack in and grab your keys.
The popular ones in this category include Trezor, Ledger and KeepKey. They run often below $200 USD in some places.
Hardware wallets are best suited for those who want to store larger amounts of Bitcoin for an extended period. But, they are not great for on-the-go users.
They are often fire proof and water proof. If you lose one or damage one, you can recover the keys — remember that’s all that’s stored there — assuming you did make a backup. Some people even store them in a safe deposit box in banks or in vaults.
Whichever option you choose, remember that the Bitcoin you have could significantly go up in value, so plan ahead!