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Understanding Bitcoin-How To Store Your Bitcoins-Lesson 12

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Author : Bitconnect
 

Advantages. Portable, and most people have their phones with them at all times. Simple to use. Wallet can be moved to another device easily if need be. Can be used when out an about at merchants which accept bitcoin. Disadvantages. If device encryption is not used, has security risks. Less secure than hardware or coinbase multi-signature wallets. Known weaknesses in android’s random number generator left many mobile wallets vulnerable, although this problem can occur with any type of wallet. Summary. A mobile wallet is good for a small amount of coins. They have their advantages for sending and receiving small amounts, and with their QR code scanner they can easily be used to pay for coffee and the likes at merchants which accept bitcoin, for example. They have security implications but can be used for every day sending of coins in a reasonably secure way. They are no less secure than the average online wallet if a backup is taken and your phone is not rooted/jail broken and malware free. The final wallet to be discussed here is a paper wallet. Paper Wallet. A Paper Wallet at https://en.bitcoin.it/wiki/Paper_wallet is a secure way to store bitcoins offline. It involves printing out the private public key pairs in plain text and as a QR code for easy scanning later. They should never be generated online but instead generated on a secure machine using local software. The receiving address can safely be stored on your machine to top it up at any time but the private key should only be stored on paper. The paper wallet can be printed multiple times and should be stored in multiple locations in trusted places. A paper wallet has a very high security margin, and can be further secured against theft by storing the private keys encrypted with a passphrase on the paper.
 

These wallets however can be at risk from theft if an insecure computer is used to import the private key when you want to use the funds, so care should be taken here. In the event of a plain text paper wallet, theft of the paper wallet can result in coins being stolen if you do not move them before the thief does. The wallet can be disguised as something else if need be. Advantages. Secure, versatile and safe from most sorts of digital disasters, including EMP explosions which can damage any electronic devices in the vicinity. Easy to copy, store and distribute. Can be used as a gift of bitcoin. More secure than most wallets. In the event of death of the coin holder, plaintext wallets can be recovered by surviving family easily. Disadvantages. Multiple copies should be stored, to secure against fire and flood. Not as secure as LEDGER and TREZOR wallets due to the risk of theft upon import on an insecure machine. Research on generation software should be done, flaws in the random number generator can render the wallet unsafe. The wallet should always be generated on an offline or secure machine. Can be more inconvenient to import. Summary. Paper wallets are among the most secure forms of wallet, alongside hardware wallets. Their security is almost tied, but the hardware wallets are more secure after initial setup due to their ability to be used on even a compromised machine safely. Paper wallets could be set up in a multi signature configuration which would bring their security on par with hardware wallets. For long term storage of coins, they are a great option and one of the best on par with hardware wallets, but for large sums should be encrypted with an easy to remember passphrase or disguised.
 

If the coin holder dies provider family members know where to find the wallet these can be the easiest to recover. They are the most reliable way of storing coins if multiple copies are saved, although hardware wallets can be recovered with their seed. Security tips. Security tips when using any kind of bitcoin wallet are below: Use well-known audited software, and do your research. Never store large sums of coins on an exchange or online wallet, apart from the coinbase multi signature option. Large thefts and losses have occurred, as shown here at http://www.wired.com/2014/03/bitcoin-exchange/. Store paper wallets safely. Backup wallet files and/or seeds. For long term storage of large sums of money, use only hardware or paper wallets. Exchange your funds in blocks rather than all at once. Store funds in multiple wallets if you have large holdings. Never store large amounts of funds in unencrypted wallets or store private keys on your desktop, for this reason at https://bitcointalk.org/index.php?topic=1451715.0. Remember, if you are not in exclusive possession of the private keys, you do not own your coins, even if they are your own coins. This is a good rule of thumb to remember. Conclusion. There are many different ways to store bitcoins, each with its advantages and disadvantages. For people with small holdings, or who store small quantities at a time, mobile or desktop wallets such as bitcoin QT or electrum are good enough along with online wallets. For more serious users and users with large holdings, hardware wallets such as TREZOR or LEDGER or a Multi-Signature solution is advisable. For long term storage and infrequent access, paper wallets are ideal, or a well stored hardware wallet and storing its seed well. For gift purposes, a paper wallet is an ideal presentation. There is a wallet for every type of user, after doing your research choose the right wallet for you.
 

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