Once you have bought Bitcoin, or other cryptocurrencies, what is the best place to store them? Let's review the different wallets available to keep your cryptos.
Surely you are already aware that cryptocurrencies have a promising future in our daily lives and that they are revolutionizing the way of carrying out operations and transactions in exchange of goods or services. But perhaps you are wondering: where can I store my cryptocurrencies?
Wallets are the place to store our cryptos. It can be said that it is the equivalent of a bank account, because we will have a public key, which is like the account number, and a private key, which would be like the personal password.
As a great advantage over traditional bank accounts, cryptocurrencies are created more easily. In addition, depending on the type of portfolio you use, it will give you the opportunity to be the only one who can exercise control over that money.
We must remember that the blockchain is a ledger that links balances to addresses in Bitcoin (or other cryptocurrencies). This means that what the wallets really store are not the coins themselves, but the private keys that give the authorization to carry out operations on the addresses to which they are associated.
Technically it is not correct to say «I have such number of cryptocurrencies». In fact, the only thing you have are the private keys capable of managing the addresses that have attributed X amount of crypto assets in the blockchain. What is really registered and confirmed in the blockchain are the ownership changes of the corresponding quantities between different addresses.
Types of wallets
1. Online wallets
They are the most used, the easiest to use and the least safe. These wallets store the users' private key in a server controlled by a company. In other words, the user does not know or have the private key of the wallet and, therefore, the company offering the service is responsible for safeguarding and protecting that private key.
These online wallets are widely used because of their ease of use and accessibility, because you can access them from anywhere and allow payments and transfers to be made quickly. In short, they are ideal for having a small amount and being able to operate quickly and comfortably, but not for depositing all your savings in there.
This type of wallet is the one offered by almost all crypto exchanges. When you make the purchase of cryptocurrencies, they are deposited automatically in an online wallet and then the user can choose whether to transfer them to another or leave it there.
Some examples: Kraken, Bitstamp, Coinbase or Binance.
2. Desktop wallets
These wallets are those that, first of all, you must download and install in your PC. Generally, there are Mac, Linux and Windows versions of each. The important thing in these cases is that you don't need to be online in order to be able to check your balance. Now, in order to make transactions you will necessarily have to connect to the Internet. Among their advantages we have that they are easy to access and generally easy to understand. Another point is that they tend to be more secure than online wallets because the user is the only one who has the private key. For that reason, they have less likelihood of theft.
One of the problems with this type of wallets is that they are not portable, so they can basically be used to store large amounts of cryptocurrencies that you will not use very often.
Some examples: Exodus, mSIGNA, Green Address, Mycelium, Samourai or Electrum.
3. Smartphone wallets
These are applications that work as "light" clients, so they occupy a few megabytes on your devices. Some of them can be synchronized with web or desktop clients, in such a way that they work as a multiplatform wallet, in which several clients share the same background of cryptocurrencies.
These mobile clients often integrate a simplified payment verification system (SPV), which downloads a small part of the blockchain and relies on other network nodes to ensure the accuracy of the information.
4. Paper wallets
There are two types of cold wallets, in which you keep your cryptocurrencies disconnected from the Internet at all times, making them safer than the others. One type of cold wallet is a paper wallet.
As its name suggests, it is a sheet of paper where a public and a private key are printed together. It is considered to be a type of "cold storage" (not coming into contact with the Internet).
What is printed on the paper wallet are the keys, usually in the form of a QR code. You can simply copy and paste them into a text document and print them (deleting the copy of the file later). Or you can use one of the free web services that generate the wallet for you to print. The generation of keys is usually done in the browser, disconnected from the network, so they are never transmitted over the Internet. To be sure, you must clear your browser's history and printer cache after printing. And never store a paper wallet image on your computer or phone.
Some paper wallet services have an ingenious design that you can cut, fold and laminate, making them a lightweight and relatively safe way to store cryptocurrencies offline. Send your coins to the public address shown in the wallet and then store the paper in a safe place.
Some examples of pages where to generate paper wallets:
Bitaddress and Walletgenerator are open source random key and address generators that use your browser's JavaScript engine, so no keys are sent over the Internet. Moving the mouse to create entropy creates a random sequence in which the keys are generated. These will be displayed on the next screen, which is the one you should print. Warning: recent research shows that the Walletgenerator code might be malicious, resulting in the issuance of the same private key to multiple users.
Mycelium offers an original and even safer way to generate paper wallets, with a USB device that connects directly to your printer. It generates a paper wallet that prints automatically, without having entered your computer.
An example of a paper wallet for Bitcoin.
5. Hardware wallets
This type of wallet is also known for being, like paper, safe to keep your cryptocurrencies in a cold storage. As the name suggests, these are hardware devices, similar to a pendrive, where your account and balance information is stored. These devices are purchased over the Internet (always buying from the manufacturer) and usually cost around $100. This is undoubtedly the best option for storing large amounts of money in cryptocurrencies.
Examples: Ledger Nano, Trezor and KeepKey.
How to check the balance of your wallet
Even with cold wallets, you can check your balance at any time using block explorers (by typing your public key, never your private key, in the search box). The block explorer allows you to explore the entire blockchain on the platform you are using, as well as explore any transaction in any block that has already been extracted.
Conclusion
If you have little money invested in cryptocurrencies, choose the option that best suits your needs. However, if these amounts are significant, the safest and most recommended choice will be «cold storage», either in paper wallets or hardware wallets, which require a small investment, but are worthwhile when it comes to securing our crypto assets. And, above all, remember that the security of your money depends on you: to avoid unexpected surprises, never share your private keys.