Remember, there are no physical Bitcoins. You cannot get your hands on some Bitcoin and put it in your pocket until you find a better place to store it. So, before we even talk about where to get Bitcoin, you need to know where you are going to store them.
Bitcoin is stored in what is called a Bitcoin Wallet. The wallet essentially is a program you use to store, monitor, send and receive Bitcoin. The wallet is connected to the Blockchain, which is the ledger of Bitcoin transactions we talked about earlier in the guide.
There are different types of Bitcoin wallets. And what defines the type of wallet you are using is where the PRIVATE KEY is stored. This is important, because it goes toward the security of the wallet you are using.
So, that begs the question, what is the Private Key?
The private key is simply a long string of numbers and letters that acts as the password to your Bitcoin wallet. Now I know this might sound silly, but the private key must be kept PRIVATE. Whoever knows you Private Key essentially has access to your Bitcoins.
Do not confuse the Private Key with your Bitcoin Address, also called the “Public Key”. This is the address you give when you want to receive Bitcoins. You DO have to give your Bitcoin address to others if you want to receive Bitcoins. Think of this like you would your email address.
One other thing I want to mention is called HD Wallets. HD wallets generate a phrase called a SEED, which is a list of common words. HD Wallets have the added benefit that if your wallet is lost or destroyed, you can use the SEED to reconstruct your Private Key and regain control of your Bitcoins.
Just like the Private Key, you must keep your SEED safe and secure, because whoever has access to your SEED has access to your Bitcoins.
There are two main types of Bitcoin wallets… Hot Wallets and Cold Wallets. Let’s go ever each.
Hot Wallets are any kind of Bitcoin wallet that is connected to the Internet. Hot Wallets are versatile and convenient because they can be accessed on the web, through a computer or in some cases directly from your mobile phone. However, since they are connected to the Internet, they may be vulnerable.
Here are some Hot Wallets I use and recommend…
Cold Wallets are any kind of Bitcoin wallet that is NOT connected to the Internet. Since these wallets are not connected to the Internet, they cannot be hacked remotely. The most modern Cold Wallets are hardware wallets, where you have a physical device that stores your Private Key so it cannot be hacked or even effected by malware. Most hardware wallets have a SEED you can use to restore your Private Key if the hardware device is lost, stolen or damaged.
Obviously, Cold Wallets are much more secure than Hot Wallets. The only drawback, besides not being free, is you have to connect the hardware device to a computer if you want to send Bitcoins. However, the device does not have to be connected to receive Bitcoins.
Here are some Cold Wallets I use and recommend…
The point is, if you are going to BUY and STORE Bitcoin you need a wallet. In reality, you might want more than one wallet. But the only place you can store Bitcoins is in a Bitcoin wallet.
OK, now that we know where to store our Bitcoins, it is time to find out where we can BUY and SELL Bitcoins, which we will go over in the next lecture…