Not only has Bitcoin’s value gone up over the past year, but the available options for Bitcoin storage have also increased. The choice can be especially intimidating for Bitcoin novices.
No matter what you choose, however, there is always a tradeoff between convenience and security. And while privacy is also a factor, here we assume you are not willing to go the extra step of anonymizing and completely eradicating your financial trail.
Classifications of Bitcoin transactions
Bitcoin usage can be separated into two independent variables: “Transaction volume” and “Transaction value.” Whether these values are high are low changes which Bitcoin wallet is best for you.
“Transaction volume” is the rate of bitcoin transactions you make. This might mean one transaction per day, or only one per week. What counts as high or low is this case is fairly arbitrary.
“Transaction value” is the bitcoin value of a given transaction. What defines a large bitcoin value is similarly ambiguous. A good rule of thumb is that a low transaction value is less than or equal to the amount of money you would be comfortable carrying around as cash in your pocket. Everything larger than that might be high value.
Multiple Bitcoin wallets might be the best solution for you
There is absolutely no need for you to restrict yourself to a simple solution. Maybe the way you use Bitcoin includes all the use cases listed below, such as regular small payments, regular large payments, and long-term investments.
Use multiple options in parallel to make the most out of keeping Bitcoins both accessible and secure.
Find the Bitcoin solution for you
If you make many transactions of low value
If you are making a lot of transactions with low value (e.g., because you mostly use Bitcoin to buy socks, tea, or a VPN), then you should use a mobile wallet that you control the keys to.
With a mobile wallet, your Bitcoins are always accessible as long as your phone has power. If you use a modern smartphone with an up-to-date operating system, your Bitcoins are secure. Don’t forget to back up your seed phrase on a piece of paper and store that paper somewhere securely! Have a look at our recommendations for Android and iOS Bitcoin wallets.
If you make many transactions of high value
If a lot of money is at stake, like if you conduct a business that deals with Bitcoin a lot, or because you pay some of your staff in cryptocurrency, then you need a hardware wallet. Hardware wallets look like USB sticks and store your Bitcoin private keys on a specialized chip, similar to the secure enclave in an iPhone.
Even if your phone or computer were to get hacked, your hardware wallet would be unaffected. Since the wallet is password protected, someone who steals or finds your wallet would not be able to access it.
As with other wallets, you should store a backup of your seed on a piece of paper somewhere and keep it in a safe place. That way, if you lose your hardware wallet, you don’t lose your Bitcoins.
If you make few transactions of high value
If you have significant savings in Bitcoin that you do not need to spend or move frequently, then a paper wallet is best for you. Don’t use an online service to create your paper wallet, but rather create one yourself.
The most secure option is to get yourself a copy of the operating system TAILS, which comes with the Bitcoin wallet Electrum installed. Crawl under a blanket or tent, boot it up, and create a Bitcoin wallet. You write down the seed on a piece of paper and shut down the computer.
As TAILS by default keeps no data on your USB stick and wipes the internal RAM, there are no traces of your seed left on the computer. As long as you can secure the paper, your Bitcoins are secure. Have a look at ExpressVPN’s Bitcoin security tips!
To send your Bitcoins, you will have to again boot into a TAILS instance and restore a wallet using the seed from your paper.
If you make few transactions of low value
Unlike with your mobile wallet, you will not have to worry what happens when you switch devices. You can log into your account using an email address and a password. When you sign up, carefully go through the security options to lock down your account from hackers while keeping it accessible to you. Using a strong password and a password manager is a good idea!
Many Bitcoin wallets for many uses
There are many ways to use Bitcoin, and as many ways to keep them. Be aware of what you want to use your Bitcoins for, and how accessible they need to be. There is often a trade-off between accessibility and security, but by spreading your Bitcoins across different wallets, you can find the optimal situation!