So you purchased Bitcoin, Ethereum, Litecoin or other cryptocurrencies?
Wait a minute! It's a good idea to think about optimal security NOW.
This article is mainly aimed at beginners in the world of cryptocurrencies.
Concerning the choice of a wallet there is tons of options! I'm talking from my own experience and don't want to recommend a product I haven't tested myself.
Wallets
A wallet is needed to send & recieve Bitcoin and other cryptocurrencies.
In essence, a wallet is storing one or more private keys which are saved in the wallet file. These private keys are the access to your part of the blockchain, containing information on how much cryptocurrency you are holding. (You can read all about private keys 🔗here)
Different types of Wallets
These are the various types of wallets available:
🔵Online Wallets
Also called „hot wallets“, these wallets are connected to the internet in some way. Wallets inbuilt into cryptocurrency exchange marketplaces are hot wallets.
Storing larger amounts of cryptocurrency in such a hot wallet is the LEAST secure way of storage because you are exposing your funds to potential risks like software vulnerabilities, malware and therefore potentially opening doors to hackers.
There are traders who store large amounts of crypto on online exchanges to be able to quickly perform trades. There is lots of stories on YouTube where people have lost their crypo on online exchanges due to various problems.
📢 My personal advice: Only store crypto on exchanges temporarily, or just the amount you can afford to loose in an unlucky event.
🔵Software Wallets
These are applications running on your computer or mobile device. Some of these software wallets also offer backup mechanisms that allow you to restore your private keys in case your computer harddrive crashes or you loose your phone.
🔵Hardware Wallets
Hardware wallets are pysical devices that were designed to keep your crypo secure by storing your private keys and are not potentially exposed to computer viruses / malware.
🔵Paper Wallets
Basically your private keys printed out on paper from an offline computer. If you have a safe location at home and keep your paper wallet safe from environmental conditions (e.g. by laminating it to protect from water), this is arguably the most secure way of storing your crypto.
Which Wallet is the best choice for me?
This greatly depends on what kind of cryptocurrency user you are. You might want to spread out your cryptocurrency holdings according to your needs.
🚩 If you just want to „buy and hold“, without making crypto-transaction, a paper wallet can be the way to go.
🚩 If you are using a low amount of crypto on a regular basis as a means of payment or even trading, a software wallet can certainly be a solid choice!
🚩 If you are looking for a balance of security and flexibility, a hardware wallet is the way to go in my opinion. Hardware wallets also have an encrypted backup mechanism that protects you from loss or damage of the device.
Wallets I personally use
🔵Online Wallet
I'm using the Coinbase online exchange to purchase Bitcoin, Ethereum and Litecoin with Fiat money (in my case Euros).
Coinbase did have its fair share of difficulties in the past, sometimes with hours of outage, due to heavy traffic and trading demand in times of high crypto price volatility.
Still, Coinbase is a regulated service and has a deposit guarantee for fiat money which makes it a good exchange in my opinion.
📢If you use this 🔗Coinbase referal link to sign up, both you and I will earn $10 USD in Bitcoins if you buy at least $100 USD worth of crypto currency.
After purchasing Bitcoins on Coinbase, I quickly transfer most of it to my:
🔵Hardware Wallet
There are 3 major hardware wallets which seem to be equally secure and easy to use. Those are:
As lots of these hardware wallet are currently sold out with Ledger Wallet & KeepKey having months of delivery time (At least in europe. Check availability yourself and let me know!).
I could however aquire a TREZOR which, as of now (June 25, 2017) is still available for short term (1 week) delivery.
Trezor is constantly improved and maintained and currently supports Bitcoin, Ethereum, Ethereum Classic, Zcash, Litecoin, Namecoin, Dogecoin and Dash.
The TREZOR hardware wallet can be used together with a variety of Bitcoin wallets and online services (See 🔗here for more info).
📢In case your TREZOR is lost or damaged, you can still recover your Bitcoins using a 24-word recovery card which you should also keep in a safe place.
🔵Software Wallet
There are lots of those on the market and again, I will only mention the ones I have personally used.
A relatively new desktop wallet, but already quite popular, easy to use and visually beautiful!
Apart from Bitcoin it offers support for Augur, Dash, Dogecoin, Ethereum, Decred, Golem and Litecoin. Also features an inbuild exchange via ShapeShift. Recovery is possible in case your harddrive crashes!
The desktop version of Copay runs on Windows, Max OS X and Linux and like its mobile counterpart, supports only Bitcoin.
How to get started?
I think its a good idea to start using any one of the above mentioned software wallets and get used to the handling of the wallet with very small amounts of cryptocurrency.
I started off with the Exodus wallet. Their developers released a very easy 🔗Step-By-Step Backup video which will help you reach that extra level of security!
THANKS for reading! If you want to share your own experiences, feel free to leave a comment below.
