Are you looking for complete financial freedom? It’s within your reach when you invest in bitcoin.
With traditional forms of currency, you need permission from a bank or some other financial institution to use it. Since you own your bitcoin, nobody can take it from you or tell you what to do with it.
Before you can start taking advantage of these benefits, you’ll need to open a bitcoin wallet.
What is a bitcoin wallet? It’s the place where you’ll store all your digital currency. Having one will allow you to receive and send bitcoin.
They come with a private key that will ensure you’re the only one that can access your funds.
Are you ready to get started? Check out this guide to learn the ins and outs of storing crypto.
What Is a Bitcoin Wallet?
A digital wallet works a little like a physical one. The difference is that it stores cryptocurrency instead of physical money. Well, it’s less that it stores your funds and more that it saves the keys needed to access it.
You see, when you invest in bitcoin, you’re reserving a small chunk of the cryptocurrency available on the blockchain.
Custodial Wallets or Non-Custodial Wallets
When choosing a wallet, the number one thing you need to consider is if you want to go with a custodial or non-custodial option.
With a custodial wallet, a third party will be in charge of your private keys. They’ll sign off on transactions on your behalf.
Custodial wallets are a good option if you don’t trust yourself enough to put the security of your wallet in your own hands.
Note that it isn’t wise to keep a large amount of crypto in a custodial wallet. If the exchange were to go bankrupt, you would lose all your funds.
If you would rather not place your trust in a third party, choose a non-custodial wallet. It takes a lot of self-discipline, but you won’t risk losing your bitcoin in an exchange crash.
Hot Crypto Wallets
Crypto wallets can be broken down into two categories. These are hot and cold.
Hot wallets require an internet connection for you to use them. They are suitable for beginners because they’re quick and simple to use.
That being said, they’re also open to hackers. There are hidden vulnerabilities on the web that cybercriminals can slip into and obtain your digital funds.
The good news is that you can cut down on your risk by choosing a wallet provider with a strong encryption system:
Desktop wallets are also known as software wallets. They’re programs that you download to your computer.
If you buy crypto online rather than going to a bitcoin ATM, desktop wallets are a great and secure way to perform quick transactions. If you would rather not risk dealing in crypto online, some desktop apps are available for use without an internet connection.
Desktop wallets, while more secure than web-based ones are still vulnerable to malware. If you happen to lose your laptop, anyone who finds it will be able to use your wallet.
Most web wallets are available through a third party. That means you don’t own your private keys.
It makes saving bitcoin a little more complicated because you’ll have to do more research. The last thing you want is for an unreputable company to be in control of your private keys.
Web-based wallets are simple to use, which makes them a great option for those new to the world of bitcoin. Since you need an internet connection to use web wallets, they are vulnerable to hackers.
Mobile wallets work a little like the desktop ones. Instead of using a computer to gain access to your funds, however, you’ll be using your phone.
Being able to carry your digital wallet around with you in your pocket is convenient because it’s a lot easier to use at this bitcoin ATM than at your laptop. It also gives you the ability to access your digital currency and receive payments no matter where you are.
Keep in mind that phones are small and easy to lose. If you leave it at the coffee shop and someone picks it up, they’ll be able to get into your account. Like computers, mobile phones are vulnerable to malware.
Cold Crypto Wallets
Cold wallets are ones that you can use while you’re offline. Since they don’t require an internet connection, cold wallets are much more secure than hot ones.
Be warned that cold wallets are less convenient than hot wallets. They can also be a lot more expensive to obtain.
If security means more to you than convenience, paper and hardware are the main forms of offline wallets:
As the name suggests, a paper wallet is a piece of paper that contains your private keys. Since your codes won’t be out in the digital sea somewhere, it will be difficult for hackers to get their hands on them. You also won’t have to worry about a third party owning your keys.
You will need to be a bit tech-savvy to use a paper wallet. Some of them contain QR codes that make it a little easier to use them at a bitcoin ATM, but it will still take a lot of effort to move currency between two wallets.
It’s important to note that it’s easy to lose paper. If someone in your household mistakes your wallet for garbage and tosses it, there goes your digital currency.
If you want to go a little more high-tech than paper while still keeping your private keys offline, hardware wallets are going to be your best option.
These are wallets that you can obtain using a physical device such as a flash drive. They can be expensive to buy, but they’re probably the most secure method for storing crypto, and you can find them at most electronic stores.
The downside is that they can be difficult for beginners to use. If you’re a crypto newbie, it’s recommended to try out a different storage method and work your way up to hardware wallets.
Choosing the Best Option for You
Now that you know a little more about your wallet options, it’s time to pick one to trust with your digital currency.
There are five major things to consider, as well as a few little things that some people don’t think about when making their choice:
When it comes to your digital funds, security is everything. As you can see, most of your wallet options do have vulnerabilities to some degree. The important thing is choosing a provider that has the fewest amount of them.
Say you download a wallet app on your phone. Having to use a PIN to sign into it every time isn’t secure, and it’s a massive inconvenience.
Some apps will allow you to sign in using facial recognition or your fingerprint. You’ll be able to get into your wallet in a matter of seconds, and it will be difficult for an outside party to replicate your fingerprints.
Private Key Access
As stated before, if you don’t own your private keys, you technically don’t have any control over your cryptocurrency. When you want to buy or send bitcoin, you’ll have to ask a third party for permission.
If that fact bothers you and you don’t mind a little responsibility, pick a wallet that gives you access to your keys.
Before picking a provider, do your homework by researching the company’s reputation. If they’ve been hacked before, that’s something important to know. You should also look up the features that the wallet can offer you, and learn where it stands as far as user experience goes.
You can get most if not all of this information by looking up customer reviews.
Some wallets have options that will allow you to back up your data. If your mobile or desktop app crashes, you’ll be able to regain access to your bitcoin like nothing ever happened.
If you’re planning to store a lot of bitcoin, having a wallet with this feature is helpful. It also makes life easier if you end up storing several types of cryptocurrency in your wallet or you’re thinking of using multiple wallets.
Whenever you buy or trade bitcoin, you’ll have to pay a small fee to the blockchain miners. Depending on how often you deal in cryptocurrency, these fees can quickly get out of hand.
Having a wallet with fee customization options can take some of the financial stress off your shoulders.
For example, some have fast, medium, and slow presets. If you choose the slow one, it will take longer for your transaction to process, but the fee will be a lot cheaper.
Other Features to Consider
If you want to be able to keep up with who sends you money for what (and vice versa), a note feature will help you stay organized.
Many wallets will give you the option to view your funds as crypto units or local currency. That means you’ll always be able to stay on top of how much your money is worth.
How to Set Up a Digital Wallet
In most cases, setting up your wallet of choice only takes a few steps. The process does look a bit different depending on if you’re setting up a hot or cold wallet:
The first step of opening a hot wallet is to head to the Google Play Store or the IOS app store. Search for the app you want to download and install it.
Open the app and follow the setup steps. In most cases, you’ll have a recovery code that you’ll need to write down (without it you won’t be able to back up your wallet) and set up a password.
Once that’s done, you can add bitcoin to your wallet and use your receiving address to request funds from others.
If you’re going to use a hardware wallet, you’ll have to buy the device. From there, it’s a matter of going to the provider’s website to download the software and set up your wallet. Like with the app option, you’ll receive a series of prompts that will walk you through the entire process.
After you get through all the prompts, you’ll be able to transfer crypto to your account. Keep in mind that most hardware wallets won’t let you buy bitcoin using traditional currency such as the US dollar.
BitAddress.org is an open-source software used for making paper wallets. Once you’re on the site, you’re going to move your mouse around to create a random private key.
When you’re satisfied with your key, click on the “Paper Wallet” option. You can now enter the address that’s going to be associated with your wallet. There are multiple fields, so you can put in more than one address if you wish.
Once you’ve entered your address(es) Click the “Generate” button and print out your wallet.
Store Your Cryptocurrency Safely
What is a bitcoin wallet? It’s a place where you can safely store your cryptocurrency. Without it, you won’t be able to buy or transfer a single coin.
As you can see, there are several options available to you. If you would like to prioritize security and don’t care about a little inconvenience, cold wallets are the way to go. Hot wallets are more convenient and easier to use, but they’re vulnerable to hackers.
Want to learn more about dealing with bitcoin? Visit the Technology section of our blog for more articles like this one.