Bitcoin is blowing up all over the world. The cryptocurrency is valued higher than it ever has been since being introduced in 2008 and investors everywhere are taking notice. But the question remains, whether you bought your Bitcoin years ago or last week, where are you going to keep it? The answer is a Bitcoin wallet.
Since Bitcoin is a digital currency, there is no physical representation of its existence, unless you create one. That is where the Bitcoin wallet comes into play. One of the most common wallets out there can be found at Blockchain.info, which is one of the first entities to offer a Bitcoin wallet.
Technically, a Bitcoin wallet is a software program where you can store your digital currency. In practice, that means that the private key that represents your Bitcoin address is stored in your digital wallet. The security of that wallet is paramount to being able to secure your Bitcoin.
There are really 4 different types of wallets: desktop, mobile, web and hardware. A desktop wallet is perhaps the most secure, because it means that you are installing the software on your desktop at home and creating an address that will allow you to send and receive Bitcoin. That is also where you store your private key.
You can also run a mobile app wallet on your smartphone, which will allow you to buy and sell Bitcoin from your phone. You can connect your mobile wallet to your touch to pay function on your smartphone or enable a QR code to pay for things with Bitcoin.
The web wallet may be the most common method of Bitcoin storage, but the least secure. When you join a service like Coinbase or Blockchain, you are storing your private key online and you are depending on their security for your ultimate safety of your Bitcoin.
Hardware wallets are the most rare and are still mostly in development. These are small USB drives or computers that can store the private keys of your Bitcoin and allow you to protect them from hackers or malware. They are the latest in cold storage of Bitcoin and can be more secure than your desktop or mobile phone.
The fact of the matter is that none of these Bitcoin wallet options can be perfectly reliable. There is no perfect way to store your Bitcoin. The most paranoid users can write down their private keys and store them in a safe as a last resort, but even that might not be enough. The paper wallet solution can be had by generating a copy of your Bitcoin private key and printing it out or copying your address on to a piece of paper.
Since Bitcoin is based on a decentralized ledger of transactions arranged in a blockchain, there is very little you can do to create perfect security. At some point, you have to take the leap and put your trust in a trustless system.