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An Introduction to Cryptocurrency Storage and Bitcoin Wallets

In 2019 admittedly, storing bitcoin and other popular cryptocurrencies is not as straightforward as it should be. If you have a varied portfolio with a mix of different altcoins, finding one place to store all of your assets is frustratingly difficult.

This guide is here to explain the best ways to keep your digital assets as safe and secure as possible. We give you a number of different options catered for the amount of cryptocurrency you hold, your budget and how diversified your portfolio is.

The 6 options available, in order of safety are as follows:

1. Storing cryptocurrency on a DEX (Decentralised exchange)
2. Storing cryptocurrency on a centralised exchange
3. Software Wallets
4. Mobile Wallets
5. Paper Wallets
6. Hardware Wallets

1. Storing cryptocurrency on a DEX (Decentralised Exchange)

If you like climbing tall buildings without a harness, edge jumping or juggling fire, then storing your cryptocurrency permanently on a decentralised exchange may be the right option for you.

Decentralised exchanges such as IDEX, are unregulated, uninsured and only party managed. If something is lost, stolen or misplaced you have no entitlement for a refund, you have nobody to seek a refund from and you have no insurance.

We advise to trade with caution on a DEX and only store your cryptocurrencies on these markets when trading over short periods of time. Once a trade is complete, immediately withdraw to a cold storage device method.

This is a high risk storage method, Beware!

2. Storing cryptocurrency on a centralised exchange

A second high risk option, albeit probably the most commonplace method used to store your Bitcoin / Altcoins is within a centralised exchange.

Whilst flagship cryptocurrency exchanges such as Kucoin and the market leader Binance are constantly working to make their platforms as secure as possible, they are still precarious places to store large amounts of cryptocurrency, especially any that you intend to HODL for an extended period of time.

If you store your crypto on an exchange, whether that be centralised or decentralised. You are always susceptible to a hack.

In June 2011  the Mt. Gox exchange, the largest and most trusted at the time was notoriously compromised when a hacker managed to change the nominal value of Bitcoin to one cent and then transfer approx 2,000 bitcoins from that marketplace. In 2014 another hacker raided the Mt. Gox exchange again, this time stealing 744,408 bitcoins belonging to customers. None of which were ever returned.

In addition to the ever looming possibility of a hack, you also have to play by he rules of that exchange. At will they can adjust transaction fees, change terms and conditions, as well as stopping trading completely for 24 hours at a time.

If your cryptocurrency is stored on an exchange, it is never entirely yours.

However, if you intend to day trade or swing trade between cryptocurrencies week by week, then using exchanges for large periods of time and not moving crypto over to a secure wallet could be recommended.

An important thing to note is that if you are trading with a small investment, moving frequently back and forth from exchanges to cold wallets can come with costly withdrawal fees.

The top 3 safest, most user friendly cryptocurrency exchanges we would recommend are as follows:

3. Software Wallets

A software wallet is probably the most common option of offline storage. Often referred to as cold wallet, they require you to own two addresses.. your private key and your public key.

A public key is a transaction ID you provide to others so that they can send you cryoptorrency. These are free to share and although your balance is often publicly available, they are not hackable and can be publicly shared online.

A private address on the other hand, should always be secure and kept secret. anyone who has access to your private address will be able to withdraw your crypto assets within a matter of minutes.

When using a software Wallet, you are in charge of the security of your private keys, never show this to anyone and never keep them stored somewhere they could easily be compromised, i.e cloud storage or email.

A software wallet is installed directly onto your computer, is  relatively simple to use and best of all, is free.

When using a software wallet you must maintain a secure operating system that isn’t easily susceptible to a hack.

Some examples of popular software wallets are as follows:

  1. Coinbase (iOS, Android, desktop. Limited storage options, but very user friendly)
  2. Jaxx (iOS, Android, desktop)
  3. Exodus (Desktop, great UI)
  4. Electrum (Not beginner friendly)

4. Mobile Wallets

Mobile wallets work in a very similar way to software wallets, with many of the largest desktop wallets providing mobile apps. The advantage of a mobile wallet is of course the convenience of being able to be access your Bitcoin & altcoins on the go.

However bare in mind, you are a lot more likely to lose a mobile phone, or suffer theft than when using a desktop computer, or a laptop. So, of course, if using a software wallet or mobile wallet please take care to backup your data and maintain a secure interface!

The 3 biggest mobile wallets out there are as follows:

  1. Abra (30 cryptocurrency options, IOS, Android
  2. Coinbase (iOS, Android, desktop. Limited storage options, very user friendly)
  3. Jaxx (iOS, Android, desktop)

5. Paper Wallets

A paper wallet is a free and very safe way to store crypto, however can be confusing to do correctly.

In short, a paper wallet is simply a piece of paper with your private key written on. The advantage of storing your private key on a piece of paper, is that of course, it’s incredibly secure. Only someone who has access to that physical document will be able to steal your bitcoin.

However, the disadvantage is that if you lose this piece of paper. For example, if stolen, if lost or detroyed in some way; then all of the bitcoin stored within that private key will be lost forever.

Most people using paper wallets tend to be long term HODLers with the intention of storing their cryptocurrency securely offline for a large period of time. If you are a short to medium term investor then a paper wallet is just not convenient.

6. Hardware Wallets

For anyone intending to store a large amount of cryptocurrency securely, we would definitely recommend a hardware wallet such as a Trezor or Ledger. These two methods are the ultimate option for crypto storage available at the time of writing.

A hardware wallet is a small device that to the untrained eye could be mistaken for a simple USB pen. They are incredibly are easy to backup, are very secure secure, there is less margin for error and the user interfaces are very simple to use. In the event of a lost hardware wallet / stolen wallet, a thief cannot access your private keys and crucially, you will be able to recover your data.

Having used both of the market leading devices, we’d sway toward the Ledger for its ease of use and features. Currently this is the best cold storage option on the market for any mid to long term investor taking the storage of their cryptocurrency seriously.

Remember if purchasing a Ledger Nano, always do so directly from the Official Ledger Store to avoid scams. Never buy one second hand!

For more beginners guides, head over to our Tutorials section and for links to recommended Hardware wallets, head over to our shop.

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