Where can I keep my Bitcoin? (Ether, Litecoin, Dash, Zcash, etcetera)
Overlooked amidst the cacophony of the “big” crypto-currency questions — buy? sell? soft fork hard fork? — is the fundamental query posed in the title. Re-stated for clarity: what are the choices for storing Bitcoin (or your favorite crypto-currency)? What are the pros and cons of each? And most overlooked of all, how can I rest easy that my Bitcoin is secure?
These are important questions, rendered all the more important by some of the very properties that make crypto-currencies attractive in the first place. To wit: should some na’er-do-well make off with your Bitcoin, odds are that it is IRRETRIEVABLY GONE. That is the flip-side of the prized anonymity prominently chiseled into the Bitcoin Value Proposition. Another example, if you’re using a wallet app: should you lose your phone or delete the wrong directory on your Mac, well, no support desk on the planet can help. That is the flip-side of the strong cryptography that underpins the entire endeavor.
The fact that you chose to read this post very likely means you’ve put at least some thought into the “Where should I keep my Bitcoin?” question. That puts you in the minority, as most people leave their Bitcoin on the exchange where they purchased it (cough, Coinbase, cough). Heck, based this graph …
… one imagines that a whole lot of “lightly learned” Bitcoin owners are completely unaware that they HAVE a choice of where to keep their Bitcoin. There are advantages to leaving Bitcoin on a reputable exchange. Those need to be weighed against the risks. Folks unaware of the risks might wake up one morning to the VERY surprising news that their Bitcoin was stolen in a hack of their exchange (cough, just last week, cough). That would be unwelcome motivation to learn that there are, indeed, other places to keep ones Bitcoin.
We will take a look at the most popular places to keep Bitcoin, discuss the pros and cons, and highlight best practices for each option.
- Account on an exchange
- Account on an unaffiliated website
- Unaffiliated wallet app running on phone or computer
- Hardware wallet
Before we can get to the looking/discussing/highlighting, however, we will tackle a more foundational question in the next post later this week: “Where is a Bitcoin?” Those who have read The Bitcoin Tutorial, fret not, we will keep it to but a single post.