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Storing your bitcoin and cryptocurrencies
When you made your first purchase of a cryptocurrency on a platform like Coinbase you get an address, also called a wallet, that holds your coins. However, the problem with storing them at an exchange where you bought is that you don’t control them yourself. Instead, you put your trust and faith in that the company behind the exchange will keep them safe and one day give them out to you when you request so. If for example, the exchange would get hacked or go bankrupt you would stand the risk of losing all your coins with it.
This is the reason why it’s so important to store your coins a safe way, by using a wallet you control and own yourself. To do that you have three main options, through a hardware wallet (safest), a paper wallet (cheap and safe), or through a software wallet which is the most common way.
There are many different options for storing your hard-earned coins in a software wallet and most of the time your choice depends on what coin you want to store. A good option that we recommend especially if you already hold multiple currencies is the Exodus Wallet. This is a free wallet that as you can see in the image above is able to store a lot of different coins making the painstaking process of handling a separate wallet for each coin go away.
For most of the coins out there you can find a wallet with a nice graphical interface but quite often you’ll need to download the whole blockchain to your computer which will take up a lot of space and time. This is not the case for a wallet that runs on a smartphone of course. Another problem that comes with having your wallet on a device is that it potentially could get hacked. This would compromise the safety of your coins since the hacker could access your wallet if it’s open or just see when you write in your private key or seed for example. This is the main reason why the other two alternatives using what is called cold-storage, since it’s not sitting “hot” on a device, is considered to be much safer options. If you choose to go with the software wallet option, remember to always write down your backup code, called the seed, and keep it safe in multiple locations if your device would get stolen or crash one day.
A paper wallet is a piece of paper that you generate offline on your computer and print out to keep your coins on. This might sound weird but since everything you need to access your coins is the private key, which is just a string of numbers and letters, this can, of course, be kept on a piece of paper. This option is mainly suiting for longterm storage since to do transactions from the wallet you need to import it in a software wallet which is a bit of a hassle.
To generate the paper wallet there are multiple sites you can turn to depending on which coin you want to store. When you’re on the site you often get the option to download the site as a zip file so you can generate the wallet without having to be connected to the internet. After the download is complete you turn off your connection and generate the wallet.
What you do next is to print it out, preferably on a printer that is not connected to the internet, and close down the page before you start your connection again. Be sure to never show the private key printed on your wallet to anyone or print it out at work for example where the IT-guy in charge of the printer probably can see everything that has been printed.
Now all you have to do is do a withdrawal on the exchange you have your coins at, and scan the public key QR-code or write in the address where it asks for it. Remember to make a backup copy of the wallet that you hide in a safe place preferably far away from your original in the event of a house fire for example.
A hardware wallet is a really fancy cryptographically secured USB-stick that can keep your coins safe outside of a computer or smartphone in the same way as a paper wallet, but at the same time has the benefits of a software wallet in that you easily can do transactions from it. The way it does that is by always keeping your private keys in the wallet and never on the computer you plug it in to. So even if your computer would get hacked your keys are still safe inside the wallet. This is why it’s considered to be the best option for storing your coins and should definitely be the choice for you once you have enough invested that it would suck if you lost it.
The most common option is the Ledger wallet, that can be seen as something of industry standard. They recently surpassed one million units sold and are often swamped with orders making the wait to get your hands on one sometimes as long as months. However, we can assure you it’s worth it. The Ledger comes in some different models but the most popular one is shown in the image above is called the Ledger Nano S and is the perfect option for the regular user. At the moment it can hold most of the popular coins and new ones being added constantly.
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Awesome job getting all the way here. Now you hopefully have an understanding of how Bitcoin works, its underlying technology the blockchain as well as how you buy and store your crypto-coins. 💪
We’re working hard to get you the next part of the Beginner Guide where you will learn about alternative cryptocurrencies, so-called alt-coins. Until then consider following CoinSpecto on facebook and twitter to stay up to date with the latest news, guides and tips & tricks. If you found this guide useful share it with friends and family so they also can join you in this financial revolution! 🚀