Have you purchased Bitcoin from an exchange and now exploring “How To Store Bitcoin?”
Voila! Here you’ll uncover everything you must know about storing Bitcoins.
Bitcoins are collected on the Bitcoin blockchain and a “wallet” is required to access and utilise self-owned Bitcoins for transactions (Read: How do Bitcoin Transactions Work? to know more about Bitcoin transactions).
To store Bitcoins, you need to have wallets. A ‘wallet’ alludes to a physical holder for physical cash; in this circumstance, fiat money. A cryptocurrency wallet is less similar to a standard wallet. It is a lot more comparable to a financial balance, a bank account to be precise, but where you have more control over and less paperwork to do. A wallet typically allows you to receive, send and store Bitcoins.
Just consider it along these lines; a wallet is invariably a kind of document for cryptographic money, similar to what a ledger is to fiat cash. All the more, a wallet is a specific location on the Bitcoin meticulously arranged database that stores the critical components, the keys.
Keys and its fundamental importance: public keys and private keys
Each wallet composes of two unique parts: the public key and the private key.
1. Public Key
As the name infers, each client in the system knows the public key and uses it for transactions among users. It is like an email address ID where a client can impart the email ID to anybody, and individuals with the email ID can transmit messages to the holder utilising that particular ID.
A user say, A, can encrypt a message by combining the public key and private key, to create a short digital signature on the message. Another user, say B, with the public key can verify whether the sender has access to the private key. In the public key encryption system, only A can decrypt the message with the private key thereby verifying the authenticity of the message.
2. Private Key
A private key is especially unique, and it is required for verifying the client’s data, providing them access to their coins and however they would want to exercise it. A private key is exceptionally crucial for people prominently using cryptocurrencies and should be fiercely protected at all expense.
If a public key is the email address ID that can be shared with anyone, a private key is the password to that email ID. If operational security is compromised, there is ideally no possible way the coins stored in the wallet can be protected against robbery or hacking.
Private keys are created utilising an irregular number generator or client developed. Without this key, the holder’s digital currency is next to worthless. In a situation where a private key is lost, all the coins held in the wallet are irrevocably lost.
Ways to store your coins in the wallet
Bitcoin storage falls under two classes, pronouncing upon their web network status: Hot Wallet and Cold Wallet.
A. Hot Wallet
Hot wallets are the wallets where the private keys are on the device and can be accessed from the internet. It is the easiest way to store and access your Bitcoin from anywhere around the globe. They are quite user-friendly; however, this feature makes them invariably prone to cyber theft or hacking.
The different types of Wallets on the Hot Storage are:
1. Web wallet
Web wallet, also known as an online wallet, is typically a Bitcoin wallet that works through internet browsers. Standard models of web wallets are Coinbase, Strongcoin, BitGo, Xapo, Blockchain.info, and Counterwallet. A web-based wallet is not a safe way to store an enormous amount of Bitcoins that can be easily hacked by hackers — however, it the most comfortable wallet for a beginner to start within the cryptocurrency ecosystem.
2. Mobile Wallet
Wallets that are efficiently stored on a cell phone or tablets are known as a mobile wallet. It works efficiently as a versatile application where the private key is put away on the mobile communication device. Most mobile wallets are accessible from Android and iOS devices and can be easily downloaded through the Play store and Apple store respectively. Examples of mobile wallet include Breadwallet for iOS devices, Mycellium for Android devices and bitpay for both the platforms.
3. Desktop Wallet
Desktop Wallets are the wallets stored on the computer’s desktop. The programming applications can easily be downloaded from the internet and installed on your PCs, where the private key is carefully saved on the hard drive of the standard PC. They are as secure as your desktop is. So, it’s not advisable to keep a large amount of Bitcoin in your desktop wallet. Exodus is an example of Desktop wallet, and it is by far the most user-friendly desktop wallet.
B. Cold Wallet
The private keys in the cold wallets are stored securely in such a way that they never come in contact with the internet. It retains Bitcoin entirely offline and away from any possible form of internet admittance. It restricts from the potential risk of cyber attack, typically resulting in theft (Read also: Bitcoin Cold Storage: The Basics of the Offline Wallet)
The different types of Cold Storage wallets are:
1. Paper Wallet
A paper wallet is typically an identification card that contains all the data needed to generate any number of Bitcoin private keys i.e. a twelve-word keyphrase. They are typically printed as specific QR codes which can be examined online by the prospective client to pay out an exchange. Anyone who can see or steal the paper from you will have access to all your Bitcoins in the paper wallet (Read also: Bitcoin Paper Wallet: How to generate it?).
2. Hardware Wallet
Hardware Wallet is the most secure wallet and can be used to store a large number of Bitcoins. It allows you to store your private keys in the hardware device on the microcontroller that cannot be penetrated or connected to the web, thus making it secure from online hacking. Moreover, your private key cannot be transferred out of the device adding to the extra layer of security. The most common hardware wallet includes Trezor, KeepKey and Ledger.
Which Wallet Is Ideal For You?
There are undoubtedly numerous conceivable Bitcoin wallets available, accessible with various highlights and changing levels of storage, availability, security, and wellbeing. It is prescribed to ascertain the advantages, uses, utilities, along with the disadvantages and drawbacks of every wallet before settling on one that meets your requirements.
Be that as it may, cold storage wallets are by and large thought to be more secure than hot wallets, till date, there is no recorded occurrence of a security breach including a cold storage framework.