Each and every bitcoin address (the string of digits and letters we discussed in the previous lesson) has a matching private key that gets saved in the file (wallet) of the individual that owns the bitcoin balance.
One of the biggest misconceptions surrounding bitcoin and bitcoin storage is that you bitcoin wallet holds your bitcoin’s for you. This is not the case. In reality, your bitcoin wallet never contains bitcoin’s. It simply contains the private keys that you need in order to access your bitcoin address and conduct transactions.
There are a number of different types of wallet that you can use to store your private keys, and you should choose one or more of these types according to your own personal preferences. Of course, the word preferences here refers to how you expect to use your bitcoins. If you only ever expect to undertake bitcoin transactions whilst at home in front of your computer, then a desktop bitcoin wallet will likely be good enough choice.
Desktop wallets are – as the name suggests – wallets that you store on your computer and can gain access to through your desktop. Desktop wallet software often varies in features, with some focused on security and others focused on anonymity, for example. You should take these varying features into consideration when choosing software you wish to run.
If you want to spend bitcoin on the move, you will likely need a mobile application-based wallet. At first, mobile wallets were quite difficult to come across. Now, however, there are numerous applications available on both iOS and android software systems that allow you to pay for goods and services using your bitcoin wallet direct from your mobile device.
Cloud-based wallets, such as Coinbase, are becoming increasingly popular. Cloud-based wallet services are offered by providers as a method of storing your private keys on a remote server, meaning you can gain access to them any time you have access to the Internet. The major advantage of this is that you do not need to have access to your mobile device or desktop in order to transacting bitcoin’s, however, there is also a major disadvantage. This disadvantage lies in the fact that you need to trust the organization that is holding a private keys. If the organization is hacked then you may lose all your bitcoin’s.
One thing you should always bear in mind is that you can – and should – secure and protect your bitcoin wallet. You can do this in a number of ways. First, you can encrypt it. If you use a password to lock the folder in which your bitcoin wallet is stored, it will add an extra layer of security to the file. This does not mean hackers will unequivocally be unable to access your information, but it does make it much more difficult.
Alternatively, you can use cold storage. Core storage is the term used to refer to storing your private keys in the real world so that hackers and malware abuses were unable to access them online. Many individuals that have large bitcoin balances will store the majority of their balance in this way, and transfer small amounts to their online storage as and when required.
So you understand what bitcoin is and you’ve got yourself a bitcoin wallet – now all you need to get some bitcoin’s. Find out how here…