Protecting Bitcoin is a primary concern for any cryptocurrency investor. The manner in which Bitcoin and other tokens are stored is called a cryptocurrency wallet. You will probably find yourself choosing between a digital wallet and a paper wallet when you create your first one. There are a few things you should know about each type before you decide which one is best.
About Digital Bitcoin Wallets
If you research methods for how to store your Bitcoin you will probably first encounter the digital wallet. Also known as a web wallet, this is probably the most popular method of storing cryptocurrency. As its name suggests, a digital wallet is accessed with the Internet. It is usually kept on a third-party server, although some desktop wallets would also be classified as digital.
A common example of a Bitcoin digital wallet can be found at Blockchain.info. This is the website where many newcomers to Bitcoin choose to create their first wallet. It is a simple process that provides you with a set of encrypted keys or addresses that are used to send and receive Bitcoin. One is a public key and one is private. There are also options when creating this wallet for creating recovery protocols that will help you recover the wallet in the event that it is lost.
Another example of a digital wallet can be found at a cryptocurrency exchange. When you create an account with an exchange a digital wallet is created for you and hosted by the exchange on their servers. You can deposit Bitcoin into the wallet and withdraw it when necessary. Exchanges also provide wallets that are compatible with many types of altcoins, so there is no need for you to create multiple wallets to store your assets.
There is a security risk where some digital wallets are concerned. This is particularly true with exchange wallets. These wallets can be the target of hackers and Bitcoin thieves. Many exchanges have suffered devastating security breaches which led to the loss of Bitcoins for customers. You can minimize this risk by reading the reviews of exchanges created by Cryptoswede. We point you in the direction of exchanges that you can trust.
About Paper Bitcoin Wallets
Those who want to keep it very basic might be interested in a paper Bitcoin wallet. This type of wallet is just what it says – a piece of paper. On that piece of paper are printed your public and private keys. These keys are never available to anyone except the bearer of the paper wallet. This type of Bitcoin wallet is known as cold storage because it does not maintain a digital connection.
There are some Bitcoin paper wallet providers that will allow you to design your own wallet. You can choose something that is very basic, or you can opt for a hip design that can be folded and carried in your regular wallet. On the wallet will also be a set of QR codes that are able to be scanned when you want to send Bitcoin or send your receiving address.
Paper wallets are simple and secure, but they also have some of their own vulnerabilities to contend with. For one, they are easy to lose. A paper wallet can be washed in the washing machine. It can be thrown away in error. It can be torn or become unreadable from too much use. If you lose the paper wallet and have no way to recover the addresses, your Bitcoin is likely gone forever. This is why you should take measures to back up your paper wallet. You can make a copy of it and store it in a secure location, or you can write down the keys on another piece of paper.
Why You Should Use a Digital or Paper Wallet
There are other Bitcoin wallet options available such as hardware wallets, but some of these options are expensive. You might want your very first Bitcoin wallet to be something a little more simple and free. Here are the pros and cons of digital and paper Bitcoin wallets.
Digital Wallet Pros:
- Easy and free to create
- Easy to access with an Internet connection from multiple devices
Digital Wallet Cons:
- Can be susceptible to hacks and theft
- Has a broader connection to the Internet which is risky
Paper Wallet Pros:
- Simplest form of Bitcoin storage
- Very secure
- Good for the hobbyist or someone curious about Bitcoin
Paper Waller Cons:
- Can be easily lost or destroyed
- Only holds one type of cryptocurrency
Know How to Store Bitcoin Before You Buy
Regardless of the wallet set up that you choose, you should know how to store Bitcoin before you make your first cryptocurrency purchase. Try to do some research to see which Bitcoin wallet is the best option for you. You may have different priorities than some other investors. Some people want easy access, and some others want security. Some want a measure of both.
It might also help to think about how long you intend to hold or use Bitcoin. If you are someone that envisions a long association with cryptocurrency, you will probably want to choose a digital wallet. If you are just curious and want to know what all the fuss is about, the paper wallet might be a better choice.
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