A Bitcoin address is nothing more than a public key (in which to receive funds), and a private key (used to verify that you are entitled to spend funds). Wallet software is what allows us to interact with those addresses and spend Bitcoin. As a general rule of thumb, whoever holds the private keys holds the funds, therefore it is essential to store your Bitcoin in wallets in which only you have control of the funds. There isn’t a correct answer in which wallet is “best”, there are definitely some bad choices, but it mostly boils down to personal preference and how much convenience you are willing to trade off for additional security.
It is always a good idea to distribute your funds into multiple wallets that can be trusted, this way you will not be burned as badly if one of your wallets is compromised.
Encrypt all wallets.
For each wallet you make, each should be encrypted with a strong password that isn’t used anywhere else, if possible generate a 20+ character password offline which consists of numbers, upper and lower case letters and special symbols. Write your passwords down and store them so that they will be safe from fire, flood, theft, etc.
Store large amounts of Bitcoin in Cold Storage.
If you plan on holding large amounts of Bitcoin for prolonged periods of time, cold storage and/or multisignature wallets are ideal. Cold Storage or a “paper wallet” is the process of creating a Bitcoin address offline and storing funds on that address, this process creates a wallet that is not connected to the network. A thief would have to physically steal your wallet in order to take your funds. Top of the paper wallet with Bip-38 encryption and it is nearly impossible to steal without access to each physical component. Here is a great video guide that shows how to quickly and securely generate a Bip-38 encrypted paper wallet.
Manage your money.
With Bitcoin, you are your own bank. That means that you are responsible for protecting all of your funds. If someone gains access to them, there is nothing you can do. Never give anyone else access to any of your Bitcoin wallets, they are yours and yours alone (unless you are using a multisignature wallet with other members of a company.) Keep track of your funds at all time and keep your private keys and passwords protected.
Good wallet choices.
Choosing a good wallet to get started can be a daunting task, luckily, I have some experience in Bitcoin and wallet security and can recommend a few great options for users looking for a balance of security and ease of use. For maximum security for large amounts of funds, use multisignature wallets or encrypted paper wallets.
TREZOR Hardware Wallet.
The TREZOR is a fantastic option for secure use of Bitcoin; it is a physical piece of hardware that must be possessed in order to “sign” or send any Bitcoin transaction. At the cost of $119 it is out of the price range of a lot of people. TREZOR is essentially a safe for your Bitcoins. When used on a compromised computer, TREZOR will protect your funds by keeping all keys secret. TREZOR balances ease of use with great security. You can read our review of the TREZOR here.
Ledger “Nano” Hardware wallet.
Similar to the TREZOR, the Ledger Nano protects funds by keeping keys secure, it features excellent security and is easy to use. Thewallet is run through a physical USB stick and a chrome web app. At the cost of around $53 (including shipping), the Nano is a good alternative to the TREZOR for those wanting excellent security without breaking the bank. You can read my review here.
The Airbitz mobile wallet is fantastic for IOS and Android, it offers great security, ease of use, and lots of tools to make managing funds easy. Airbitz is my go-to mobile wallet due to the great security, privacy, and extended features. Each transaction can be labeled and categorized, and transaction reports can be exported in CSV format, making Bitcoin taxes much easier.
Simple and easy to use, the Desktop QT is a good choice for a wallet, be sure to encrypt it. Downloading the full blockchain can take some time, if you know how to torrent, you can speed up this process.
Armory and Multibit.
These are both good desktop wallets that offer enhanced security over the standard QT wallet.
Online Wallets: Circle and Coinbase
Circle and Coinbase are both great options. Circle allows US users to purchase and sell Bitcoin from a bank account for free (with weekly limits). Coinbase allows users in the US and Europe to purchase and securely store their Bitcoins. Both companies are a great choice. As with any regulated and reputable exchange, Circle and Coinbase collect information to follow anti-money laundering and know your customer regulations. If you want to purchase Bitcoin at market price, you will lose anonymity.
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