Here are the prime options for storing bitcoin: • Online bitcoin wallets • Mobile bitcoin wallets • Desktop bitcoin wallets • Hardware bitcoin wallets,
Bitcoin Bonanza
Unless you've been isolated from the world, you've likely caught wind of bitcoin's astounding ascent. On December 17, 2017, the cryptocurrency reached an unprecedented peak, with one bitcoin trading for nearly US$19,800. Considering its value started at just US$967 in early 2017, the fervor among investors is understandable. What other investments currently offer a year-over-year return of over 1,947%? Seriously: if you're aware of any, reach out to us. We're all ears. However, given that bitcoin is a cryptocurrency, investing in it entails unique challenges and considerations that traditional securities don't. What exactly is bitcoin? How do you store it? Is bitcoin storage secure? These are the kinds of questions that can keep astute investors awake at night, fretting over fears of lost retirements and disappearing digital currency. But fear not! Here are some of the leading methods for safely storing bitcoin.
How Does Bitcoin Work?
Introduced in 2009 by an individual using the pseudonym Satoshi Nakamoto, bitcoin aims to offer a global currency independent of any single nation or government. Its value is determined by a truly free market, facilitating connections in an increasingly globalized world without regulatory intervention. Like any commodity or currency, bitcoin can be bought and sold at its current market value. Bitcoins are acquired through currency exchanges like Bitstamp and Coinbase, each imposing its own transaction fees. Bitcoin mining, involving the use of powerful computers to solve complex mathematical problems, is another means of acquisition. The difficulty of these math problems and the computing power required to solve them prevent the market from being flooded with bitcoins and safeguard the currency's value. Bitcoin transactions are entirely anonymous, with each transaction encrypted and users identified solely by their unique "wallet address." Access to bitcoin wallets is secured through private keys, acting as cryptographic "signatures," which users store either offline on their own computers or on remote servers hosted by online wallet providers.
Bitcoin Addresses
Similar to email addresses, bitcoin addresses enable users to send and receive bitcoins. However, unlike physical addresses, bitcoin addresses should be used only once for security reasons. After a bitcoin address has been used, and the bitcoins have been transferred to a wallet, it should be discarded. Many programs automatically generate new addresses for each transaction, enhancing security.
Bitcoin Wallets
What does a wallet do? It stores your money, and that's precisely what a bitcoin wallet does too. A bitcoin wallet is a software program that stores bitcoins, although bitcoins themselves are not physically stored anywhere. Instead, bitcoin wallets save the private security key for each bitcoin address stored in the wallet, granting the owner complete control over access, transfer, and trading of all linked bitcoins.
How to Store Bitcoin
There are four primary types of bitcoin wallets, each with its own advantages and disadvantages depending on whether security or convenience is prioritized.
Online Bitcoin Wallets
Online bitcoin wallets are stored and accessed on the cloud via remote servers. They do not exist on the owner's device but are hosted by a remote company. While online wallets offer convenience and accessibility, storing security keys on remote servers poses a risk if the provider is compromised by hackers.
Popular online wallets include Blockchain and BTC.
Mobile Bitcoin Wallets
Unlike online wallets, mobile bitcoin wallets run through apps on smartphones or tablets and are accessed only through the user's private device. Security keys and bitcoin addresses are stored solely on the device, providing mobility and offline security.
Popular mobile bitcoin wallets include Mycelium Bitcoin Wallet and Bread.
Bitcoin Cold Storage
"Cold storage" refers to bitcoin wallets that are completely offline, offering heightened security at the expense of convenience. This category includes desktop bitcoin wallets and hardware bitcoin wallets.
Desktop Bitcoin Wallets
Desktop bitcoin wallets can only be accessed from the user's private computer, minimizing vulnerability to hacking compared to online wallets. However, they remain susceptible to malware and keylogging software.
Popular desktop bitcoin wallets include Electrum, Exodus, and Bitcoin Core.
Hardware Bitcoin Wallets
Hardware bitcoin wallets, such as Ledger and TREZOR, are physical devices that store bitcoin wallets offline, providing enhanced security against viruses and malware. They use protected microcontroller areas to prevent plaintext key transfer, ensuring continuous encryption.
In conclusion, while hardware bitcoin wallets offer the highest level of security, they may require additional physical security measures. At Aureum Safeguard, we offer secure, discreet storage for bitcoin wallets through small safe deposit boxes. Should you wish to convert your bitcoin to cash, Aureum Safeguard now accepts payment via Bitcoin, with many investors exchanging bitcoin for gold to hedge against potential market volatility. Remember, hedging and diversification are fundamental principles of sound investing, so keep them in mind as you navigate the bitcoin landscape.