Bitcoin storage methods
There are a few methods of storing Bitcoin.
A Bitcoin client is used to store cryptocurrency (for example, Armory, Electrum) which assures qualitative encryption of a wallet using a password. Updated software can also additionally be installed, including good antivirus software.
However, storage of cash on a PC is impractical owing to the size of the Bitcoin system software and its complexity for first-time users to understand. There is a possibility that the computer could be hit by a “keylogger”. This is a programme which relays all data entered on the keyboard. Furthermore, when creating a virtual machine, the risk of loss of hard disk due to various stresses, for example, cannot be excluded.
On removable media
The security of the wallet which contains an important cryptocurrency number (BTC) is significantly increased provided that:
- The computer does not have access to the Internet;
- Security copies are created for the file wallet.dat which contains the keys and bitcoin addresses. The file is then deleted from the computer.
A trusted offline wallet may be chosen on the official Bitcoin website.
The wallet copies are placed on various types of removable media, including magnetic memory drives (CD-R, DVD and USB) which are placed, for example, in a safe or safety deposit box. It is then easy to restore the contents of a wallet or the necessary controls in the events of system problems or failure of the computer itself.
But users who do not have experience in handling the Bitcoin system software could have problems finding the wallet.dat file on the computer. The folder which contains it is normally hidden from Windows and in order to reveal it the user must have a working knowledge of command line interface.
On a web service or exchange
Exterior online resources are principally used for storing a small number of virtual coins, access to which is simple and quick. The wallet can even be used from a mobile phone. It is not necessary to have complicated software for the Bitcoin system. Codes and passwords for the banks of funds are retrieved by using a password generator so that the latter remain as complex as possible. An exchange for performing bitcoin storage operations can be chosen from the major exchanges. The largest are the following: Mt. Gox, Bitstamp, BTC-E, Kraken, BTCChina, Buttercoin.
However, due to legislative obligations users must abandon their personal anonymity: copies of documents have to be sent to the exchange. There is also no guarantee that funds can be returned t users in case the exchange (even with a good reputation) goes bust, suffers from a hacking attack or its owner (normally anonymous) escapes with the money. Use of more than one storage facility is recommended, holding pieces of currency in several baskets. Bitcoin does not have currency status in Russia; it cannot be legally reprimanded.
By printing the Bitcoin wallet on paper, the user has a 100% guarantee of the confidentiality of the information (private keys and bitcoin addresses), This guarantee is in the form of a QR code. Scanning it allows importing of keys and addresses to the Bitcoin client on a computer and access to virtual funds.
Storing the wallet on paper is preventative and dependable, if it is placed, for example, in a safety deposit box. However, the process of importing the keys and addresses is quite complicated for novice users. Should this fail, money can be lost.
On a card
Bitcoin cards (plastic or anodised steel, for example) make it easy to withdraw from or pay in to a wallet as required by the user, anywhere in the world, and are practical for currency conversion. They contain a QR code on the front and a Bitcoin address on the back. The QR code is hidden in the card using data from an encrypted wallet on the user’s computer. This code is not physically accessible to the producer of the card.