While it is possible to store bitcoin on the OpenNode platform within the supplied bitcoin wallet on the dashboard, we strongly recommend that you set up an external bitcoin wallet if you plan to hold your bitcoins long term. Setting up a private, personal bitcoin wallet will allow you to more easily spend, sell, and manage your Bitcoin balance.
Selecting a wallet
There are two main types of wallets: hot wallets and cold storage. A hot wallet keeps your private keys on a device that has access to the internet while cold storage keeps them on a device that has no internet connection.
Hot wallets (less secure)
Cold storage (more secure)
There are different levels of security between software & hardware wallets and it’s important to understand each level to protect your funds. For example, cold storage wallets, you can keep your private keys offline and never expose them to your computer but this adds extra steps to the accessibility of your funds. With hot wallets, you have the ability to access your bitcoin immediately online but leave yourself at risk to malware attacks.
There are multiple options when it comes to security so here’s a breakdown:
Web browser based wallets usually provide a convenient user experience for newer users but come at the cost of custody. These Custodial services hold your private keys for you but allow you easy access to them from a web browser. When it comes to storing your bitcoin safely, it’s important to understand who has custody of it.
Examples: Coinbase, Xapo, Circle
Users can easily access their bitcoin online & most web wallets have a smooth user experience, with more functionalities and an easy on-ramp.
The Web Interface acts as the storage company of your private keys and is the real owner of your bitcoin and not you.
Desktop wallets can be downloaded & installed to your computer and use your hard drive to store your private keys (these wallets can also be paired with hardware like TREZOR to store the keys offline). These types of bitcoin wallets are more secure than web browsers or mobile wallets; however, unless paired with hardware these wallets are still connected to the internet leaving them open to malware attacks making them inherently less secure.
Examples: Electrum, Copay, Exodus
This type of wallet is widely used and trusted by many. With extra privacy settings, security features, and a very easy onboarding process, this is one of the top choices for a bitcoin wallet amongst the community.
Desktop wallets are not great for on-the-go transactions unless the service provides a mobile version. Also, If your computer is affected by malware, you are at very high risk of losing access to your Bitcoin.
Mobile bitcoin wallets
Similar to desktop wallets, but these wallets can only be used via an application on a mobile phone. Mobile wallets allow users to make transactions from anywhere in the world, truly allowing peer-to-peer transactions. Most mobile wallets come with low levels of privacy by connecting to a full node that knows what transactions you are listening to and how much money you have sent & received. Though these wallets do face the drawback of being tied to a mobile device that can be easily misplaced or stolen, they do provide a great user experience and provide an easy on-ramp for new bitcoin users.
Examples: Bread Wallet, Jaxx
Easily access your bitcoin and make purchases in-store or online within the palm of your hand and use your money anywhere at any time that you’re connected.
If someone is able to steal your phone and you don’t have the proper security measures like having your phone locked, your bitcoin is at risk. You can mitigate this risk by also keeping a copy of your recovery seed off your phone and on multiple pieces of paper.
Hardware wallets (recommended)
Hardware wallets are the best option when it comes to securing your private keys offline. Your hardware wallet requires your actions for every transaction providing another level of security to the software the wallet company uses. You can store large amounts of bitcoin offline on USB drive devices offline and simply plug the drive into any laptop or desktop and send, receive, and store your Bitcoin. The interfaces for these devices are very user-friendly so anyone can buy and secure BTC themselves. Similar to software wallets, you have private keys and a pin code to access your hardware wallet. We recommend ALWAYS purchase your hardware directly from the company and never trust a device that has unusual packaging.
Examples: TREZOR, Ledger Nano S, Keep Key, COLDCARD
Smooth user experience and most secure way to store your bitcoin. Easy to create a backup and it’s difficult to make mistakes using a hardware wallet - the process is easy for any level user. As cold storage, your private keys are offline and reduces the risk of theft
A standard hardware wallet, the minimum price to pay is $50. Also, if you lose your device, access to your private keys, AND access to your recovery seed, your bitcoin will be unrecoverable.
Paper wallets are exactly what they sound like, a paper document that contains a public address and private keys that can be used to send & receive bitcoin. There are services that allow you to print your private keys as a QR code on the paper wallet and the code can be scanned by a mobile wallet and the keys will be added to the software wallet to make a transaction.
When creating a paper wallet you must be diligent with your security and always make sure there is no spyware on your computer as you are creating your wallet. Your paper wallet will act as cold storage if the paper was generated on a computer that has no access to the internet connection. Along with proper online security practices, you must be diligent with protecting the physical wallet itself because essentially you are printing private valuable information on a piece of paper that can be easily stolen or destroyed.
As long as you never introduce your private keys/seed to a desktop or mobile wallet, a paper wallet acts as cold storage that is always offline. The private keys remain offline and reduce the risk of theft and this is the cheapest form of wallet.
It’s a much slower process to using your bitcoin when using these wallets. They can also be easily destroyed by flood or fire. (Prevent this by creating multiple wallets and storing them in different locations for extra precaution.)