How To Store Bitcoin and Altoins
How To Store Bitcoin and Altcoins
Finding out how to store Bitcoin and Altcoins can be a daunting task. We here at The Coin Boys feel it is the most important thing to learn. We know it sounds weird, but it will be necessary for you to practice this first just in case something goes wrong. Before we get started there are a few things that we assume you already know.
2) You know how to buy Bitcoin and/or Altcoins.
If you don’t know both, then go back and read up on that. Otherwise you will be lost. One more thing, we won’t go into the specific brand of wallet to use. That’s going to be your choice and you should research reviews on each. Eventually we’ll be doing reviews on the different types of wallets, but for now we’ll be focusing on Bitcoin wallets, although this is pretty close to the same process you’ll use for most Altcoins. A good rule of thumb is to check out the wallets that the coin recommends on their personal site to see if you like it, in most cases it’s your only option.
When looking into how to store Bitcoin you’re given several options and all are confusing. So we are going to break it down as simple as possible to at least get you started on doing some test wallets first. By the way Do NOT send all of your bitcoin the first time you use a wallet, send a small amount, just to make sure it works and you know what you’re doing. You will eventually need multiple wallets, just the same way you would need multiple bank accounts for different purposes.
Hot and Cold Storage
Hot storage is anything that is connected to a computer or the internet, cold storage is anything offline that you have to physically get in order to access.
If you opened a Coinbase, Gemini, or any other Exchange account you essentially have a hot wallet. It is the worse kind of hot wallet, but it’s there. The reason why this is bad is because you still don’t control the money in that account fully. The only way to have control is to take it off that account and put the money into another wallet, hot or cold.
Hot wallets are usually programs on your desktop, in a browser, or on your phone. These should be treated exactly like the wallet you have in your pocket. You only hold in there what you are willing to lose because it has the highest possibility of getting stolen. Didn’t say that to scare you, it’s still more secure than your actual wallet in your purse or pocket, but security is still your number one priority.
You need hot wallets so you can easily buy things, pay for a service, really anything that is an everyday use for money. If you’re thinking in terms of a bank, your hot wallet will be your checking account/debit card.
Cold wallets come in a few different forms, Hardware or Paper. If you only have a few dollars worth of crypto and are just in this to learn about the technology, then Paper is the way to go. Just be sure to create the Wallet with your computer not connected to the internet. Some of you may be so young, you are going to need to research how to turn off the internet. You do that while I wait here and chuckle a little…. HA. Ok ready? Moving on.
Paper wallets are easy to do and only require a printer. It gives you two QR codes with Public and Private keys (We will get into that in a moment). So anyone who wants to send you money just scans the QR code and boom! You have money.
If you have a lot more money that you really want to secure then you’re going to want to spend the money on a Hardware Wallet like Trezor or Ledger Nano S. The price is worth the extra security you are getting for this. The one downside to a hard wallet is not all coins are supported on it, so do your research before sending it anything. There are also a few extra steps you need to go through to make certain it is safe to use, so don’t jump into this head first. DO YOUR RESEARCH. The best part is this allows you to have cold storage for multiple coins in one spot versus having many different paper wallets for many different coins.
The cold storage wallets are not meant to be used easily, they are meant to be used when you know for sure you need it. If a hot wallet is a checking account, the cold storage is like a safety deposit box. You can’t even touch the funds unless you have the wallet in your hands. At the very least, one of each will be necessary for each coin you have.
Tokens are a little different, some are used with the same wallet as the coin it runs on, others require their own wallet. Be sure to check with the official website to find out.
The 3 Parts of Most Wallets
With every wallet you’re given 3 important pieces of information, so be prepared to write them down clearly and right away! Have a pen and paper ready when you create a new wallet. Again this is not for all wallets, but most give you this information right away.
Seed words/phrases are a set of words that are given to you so you can recover your wallet if you need it. The order they are given, and the exact spelling are absolutely important. The amount of words you get from each wallet varies, but it is usually at least 12 different words. If anyone has those words, they have your money, so put those words in a safe place off your computer.
The private key is essentially your account number. All private keys are difficult to write down, and you have to be certain you write it down exactly because it is case sensitive. Most people just copy and paste it into a text document and save it offline. This is another situation where, if you lose it you will lose all your money. The positive side is if you have either the private key or the seed words, you can recover your money and move it fast. If you lose both… we offer shoulders to cry on because there is nothing that can be done.
This is important because this is the responsibility that comes with independence. If you lose your Debit card or don’t even know your account number at a bank, they can still somehow get you your money. Being decentralized means there is no company backing you up or helping you out.
Why would we want that? Control over our own money and no chance of it being taken or seized. As an American this is a concept that is not understandable but the American government has in it’s history taken or will take your money in a heartbeat should they need it.
In addition to that, no bank fees! That alone is just so amazing. No insufficient funds, overdraft, or my favorite “Convenience” fees.
While your private key is what you need to spend money, your public key can only receive money! So the entire world can see it and they can only give you money at best. If you take a look at our Logo the QR code there is the public key for our ETH wallet. Feel free to send some our way if you feel so inclined.
This is a strategy that is being implemented already throughout the world, having a withdrawal and deposit number, but in America they are the same number. The moment you give anyone your number for a direct deposit at work, Paypal, Venmo, etc… You are susceptible to their hacks. They get hacked, your account and information is fully exposed. If you are unaware, this has happened to you already several times, I promise. Target and Experian are good examples. What can you do? Nothing, but if you keep some of your funds in crypto then you have a leg up on securing your funds.
Single, Basic, Brain, Multisig… Too many wallets to choose!
When making your wallet you will sometimes have a choice between what kind of wallet you wish to open. To start, if you are only doing this for yourself, you will only need one type.
This is the wallet that almost all coins offer. It has everything that we talked about, and can only be used by you. If you have any family or loved ones that you want to have access to it, just in case something were to happen to you, be sure to let them know all the information possible so they can recover your wallet.
Brain WalletA brain wallet is something that is pretty cool. One thing that people find scary is remembering their seed words. They are a bunch of random words that mean nothing to you at all, so how are you supposed to remember it in an emergency? Enter the brain wallet.
Instead of using seed words, you can choose a phrase that is unique to you. An awful example is choosing the phrase “This is my Brain Wallet” (Do not use this phrase because now anyone has access to it). If you wanted to access your funds it’s as simple as remembering your phrase. The benefit being that if you have a loved one who you trust, you can make sure they know your phrase and they can easily access your funds.
IT IS SENSITIVE, everything about the brain wallet is sensitive. Upper case, lower case, spaces, symbols, etc… This is how you can make your phase unique. Changing out letters, numbers, symbols, adding extra spaces, you name it. They all count towards your unique phrase. The longer and more abstract, the better.
Have a company? A family? Newly married? This is something for everyone to be apart of. A multisig wallet is a wallet where several people have access to the funds, but 2 or more people are required to sign off on the transaction. The maximum amount of signatures varies, but you would need 2 people at least.
You can also set the amount of signatures needed to complete a transaction to as little as one, or everyone attached to the account. An example would be a one child family. Mom, Dad, and the child could each be attached to the multisig wallet and allow for their child to use it.
Let’s say the child has done their homework, did all their chores, and earned a night out with friends. They can now go out without any need for their parents to give them any physical money. Every time they make a transaction the parents will be notified and can approve it… Or deny it if the child lied and didn’t do the dishes.
The power is yours!
I hope this was a good base for starting your first wallet. It seems like a lot, and to an extent it is, but this will be worth it in the future when you do not have to call your bank ever again because your card was denied for a strange reason out of your control.
Thanks so much for reading and feel free to check out The Coin Boys Podcast to hear about different coins, tokens, and the latest news! If you have any more questions you can ask us on any social media or even give us a call. We may just answer your question on the next podcast.