If you’ve made the decision to buy some bitcoins, you may now be asking yourself how to store the digital currency. In name, the answer is what you might expect from experiences with fiat currency. But the details require a little explanation.
The private keys that are necessary for accessing a Bitcoin address are stored on a “bitcoin wallet.” In general, wallets grant you access to your public Bitcoin address and allow you to sign off on transactions, but they differ based on how you choose to access them. Factors to consider when choosing the best bitcoin wallet for you include security, anonymity and control.
Desktop wallets allow users to create an address for sending and receiving bitcoins and provide a place to store the private key for doing so. This can be done by downloading software to an individual computer.
Mobile wallets, accessed through apps, allow users to transact on the go. While “full Bitcoin” clients download the entire Bitcoin blockchain, mobile wallets are designed to utilize only a small fraction of the blockchain and rely on other nodes within that network to access the remaining necessary information.
Custodial wallets, which store Bitcoin keys on the internet through a third-party website, also allow users to access their bitcoins from almost anywhere. There is, however, the potential danger associated with entrusting someone else with that information.
Bitcoin paper wallet services provide users with a Bitcoin address and two QR codes, one that links to that address and another that provides the private key necessary for transferring bitcoins stored on it. The thinking is that this eliminates the digital storage of the key and, therefore, the potential of a cyber attack.
There are also wallets that store private keys on physical devices, like USB sticks, external hard drives and hardware wallets.
Ultimately, the choice of bitcoin wallet will come down to an individual user’s preferences. Whatever they decide, it will be a crucial aspect of their experience with the digital currency.