The world of bitcoin wallets can be a confusing one, particularly if you’re only just getting started with cryptocurrency. We’ve written overview as to what cryptocurrency wallets are, how you can use them, and how the different types work. Now, however, the aggressive movement of bitcoin has demanded that we address a new question, which is what type of wallet is best suited for long-term investment.
To be clear, this article is being written during a time of incredible strength in bitcoin. As of this time, the price of bitcoin has doubled in two weeks, reaching the kinds of prices that once existed as the wildest dreams of bitcoin proponents. The cryptocurrency has reached a high of $18,000, and while many are warning that it could come crashing back down, some think this surge is only a glimpse of more to come. Whatever the reality winds up being, all of this upward movement has emphasized the fact that more and more users are looking at bitcoin as a commodity, rather than a currency.
You’ve probably heard the argument that bitcoin is “the new gold,” and that speaks to this idea. It’s a decentralized asset with no connection to major currency markets, with a price set universally. It can be perceived as “safe” (though this is always a risky way of thinking about any investment) when currencies begin to look risky or weak. For these reasons, as well as because bitcoin simply still isn’t that practical as an everyday form of money, the digital currency is more an investment than anything else.
That implies long-term ownership, which gives you something specific to focus on when you’re looking for a wallet. And it may specifically drive you toward “cold storage,” which is to say wallets that aren’t connected to the internet. Software wallets – which is to say app and desktop programs – offer the quickest and most convenient transactions, as well as in some cases various tools for market analysis. However, they also expose you to hacking and server crash potential, both of which can devastate your accounts. As one look at bitcoin wallets argued, those worried about these security issues can also choose hardware options – which are slightly less convenient, but fully separated from the internet.
A hardware wallet is effectively a USB device on which you store all of the information you need to store, access, and use your bitcoin. And another form of hardware wallet, in a sense, is the “paper wallet,” which is actually a slip of paper that holds your bitcoin address (where the bitcoin is stored online) and your personal private key (which allows you to make use of the address) on its surface. Creating a paper wallet can be a little bit tricky if you’re not used to it, but it’s another way of storing bitcoin in a way that keeps it separate from the internet.
These are the options you may want to give serious thought to if you, like so many others these days, are looking at bitcoin as more of an asset than a currency. Storing cryptocurrency in a software wallet is perfectly convenient if you’re going to be active in trading it, or if you plan on using it to exchange money or buy goods and services. However, it does make your account at least somewhat more vulnerable. Storing bitcoin on a hardware or paper wallet, on the other hand, keeps it safe for as long as you’d like to. If you choose to, you can invest for years without ever risking exposure until you’re ready to sell back your bitcoin.