The very first thing you are going to need is a Wallet to hold and manage your bitcoins and other digital currencies. When considering these options, it’s important that you understand that you are totally responsible for your own security.
If someone gains access and moves bitcoin from one of your accounts, they are gone for ever and totally untraceable.
No one else is watching it for you. No one else is responsible. No one else is at fault.
This is by design… you are the bank and the customer… and the security guard!
So you don’t want to be looking for short cuts here.
Web Based Wallets
For convenience you should maintain one or more web based wallets. Technically these are the least secure option and there have been plenty of issues in the past…
- Any web-based wallet is going to be somewhat vulnerable to hackers
- The company could go bankrupt or simply disappear with your coins
- You can forget your details and simply be unable to access your coins
For all that, risk is relative… and a reputable wallet is probably going to be more secure than most other online accounts you maintain. It’s just that compared to the other wallets they are the less secure option.
So this where I store my ‘day to day’ funds… enough for things I’m likely to need each week, so I don’t have to keep going back to the bank…
Desktop and Mobile Wallets
These software wallets run on your computer and give you better security and more control over your private keys, (so you remove the risk of the provider disappearing with your coin).
There are still risks… any device connected to the internet is vulnerable to hacking… and even a disconnected device can be physically accessed if you lose your phone or an intruder breaks into your home.
Again you need to assess those risks and adjust the amount of bitcoin you store in any wallet accordingly. As a comparison, this might be the digital equivalent of the cash you keep in your ATM account for daily use.
This should be your main storage option for any coin you’re not actively using. This is especially important as you start to accumulate large sums.
It is a disconnected device that keeps everything secure and backed up, safe from hacking, theft, break-ins, forgotten passwords or keys, physical assault… as close to totally secure and safe as you can get.
There’s a few leaders in this area, and all of them will connect you your web based wallets and desktop software as required, so with a little planning and practice, anyone can create a system to manage their coin that offers maximum convenience with minimal risk.
Where To Start?
To get started now, I’d suggest you set up a Web Based Wallet with one of the following providers and use that to get familiar with the processes of buying and using bitcoins.
After we get started on the accumulation strategies, you can come back and choose a suitable Desktop or Mobile Wallet that meets your needs. I’d also suggest you organise a Hardware Wallet at that time as well… to make sure you have it ready to go as soon as you start to accumulate a few bitcoin.
Then as the BBH Investment Strategies start to work, you can keep spending/investing funds in your web based wallet and start moving your profits into the more secure options.
Web Based Wallets
- StrongCoin is what’s known as a Hybrid Wallet, because your private keys are encrypted in your browser before they are sent to the wallet… this means they never have access to your keys… or your bitcoin. It also offers another layer of security from hackers. One feature I really like about Strongcoin is the option to download your entire account as a single PDF file for simple hard copy backups!
- Coinbase is an exchange based wallet… so it lets you store you Bitcoin where you buy them and spend them from there as well. This is a pretty good option if you just want a no-fuss way to buy and use bitcoins. The funds are move in and out quite quickly, so you don’t need a whole lot of features.
- Blockchain is one of the originals provided by a company that’s proved to be reliable, secure and trustworthy for many years now. Blockchain is simple to use and works seamlessly on desktop or mobile devices. It’s privacy measures have copped some criticism in the past though the company says those issues have been addressed.
Desktop & Mobile Wallets
- Electrum is a robust desktop wallet with substantial security features to protect your coin, and make spending it simple and safe. It has both desktop and mobile clients, and supports/connects with all the major hardware wallets.This is a good option for anyone just getting started who doesn’t need too much in the way of management tools yet.
- Exodus is a complete platform to secure, manage and exchange blockchain assets. You can create a portfolio of different currencies, exchange any one for another, and of course, use it as a wallet to use your coin. The con here is that it doesn’t have a mobile option, but if you’re serious about accumulating digital wealth, this is a platform you ought to explore. You can always use a web-based wallet for your mobile purchases.
These are also referred to as Cold Storage options, due to the fact they are disconnected from the internet and basically turned off / shut down until you need to access them. You can consider this your safe deposit box.
Bitcoin Trezor is the clear leader in this market. It isn’t cheap, but when you get to the point where you want to secure a more substantial amount of bitcoin it will be a small price to pay for peace of mind.
The Trezor is a USB device, so you can connect it to your Desktop Wallet only when necessary… ideally when the computer is offline. If you must use it when connected, it has multiple additional security measures built to protect you if your computer is compromised.
It even has measures in place in the event you are physically attacked to coerce your access details from you. Obviously that would be a very unlikely event, but it lets you know how seriously and thoroughly they take security.
The Trezor also prompts you to create a special seed phrase upon initiation of the device which can then be used to recover your Bitcoin in the event the Trezor is ever lost or stolen.
TOR Anonymous Bitcoin Wallet
This is worth a quick mention before we move on…
TOR takes your privacy very seriously. They are best known for their anonymous web browser but their wallet is fast catching up.
The TORWallet automatically anonymizes any Bitcoins in your wallet. It never stores logs or client information. IP addresses are deleted every 30 seconds. They do not respond to any request for information from any authority under any circumstances.
If you value your privacy you might want to set up a TOR wallet and switch to the TOR browser as well.
Designing A Money-Management System
Here’s how I use the resources above to manage my funds so I can keep track of everything as easily as possible and still keep everything secure…
- I tend to buy small amounts of Bitcoin through CoinBase and just leave them in that wallet until I’m ready to spend/invest them.
- If I need a larger amount, I’ll use LocalCoins to get a better rate, and send that straight to my StrongCoin account.
- I direct all investment and mining payouts to my StrongCoin account, with different wallet for each program.
- At the end of each month, I use that same wallet to reinvest in the respective program, or else transfer the excess to my Exodus Desktop wallet.
- I also assess the balance in my desktop wallet and either reinvest it or move some funds to my cold storage option.
So while I do have a lot of other wallets in play, especially with all the mining and investment programs I use, I can manage the flow of funds for maximum security and efficiency.
This mightn’t seem too important when you’re first getting started, but be aware that you will end up with a lot of accounts and wallets very quickly! So you want to be planning for how best to manage it so you don’t lose track of your funds or get careless with security!