How do I safely store Bitcoin?
So you finally bought yourself some Bitcoin, but now you're wondering how to safely store it. All sources online will tell you that leaving your coins on an exchange is risky. Many exchanges have been hacked and people have lost their money. The most important factors to consider when storing your coins is control of your private keys and security features. Exchanges, which are places where Bitcoin is bought and sold, do not allow you to control your own private keys and does not allow for maximum security.In addition, most exchanges that you'll be familiar with are centralized and are therefore one main point of failure; if they get hacked or fold, everyone suffers.
Also, remember that your wallet which will be storing your Bitcoin is your responsibility, regardless of which wallet options you choose. From every transfer to every login, you are responsible. There is no mediating body to help with mistakes. Transactions are irreversible! Lost login information is not recoverable! You must be alert and responsible when using your wallet. Mistakes can mean losing access or losing all of your Bitcoin. Triple check each action completed - when you write down your passwords, when you send to an address, when you type in the amount, etc. Be certain of every step before proceeding.
"Hot" Storage Options
Hot storage refers to wallets which are accessed via the internet. These are software based wallets, which opens them up to more potential for hacking and malware. Web-based, plug-in, phone, and desktop wallets can all be considered "hot" storage options, in that as long as they are connected to the internet, they are accessible to attack. On the other hand, they are also accessible from anywhere that has internet or mobile service, making them easier to transfer funds immediately from anywhere at anytime. Thus, they are not viewed as advisable for storing large sums of money, but may be ideal initially and as a secondary, alternative source for storage of small amounts of Bitcoin. For example, this option may work as a "checking account", but not as a "saving account" where you would keep the bulk of your investments. These options are generally free or low cost, and often work on multiple devices (such as your phone and computer).
"Cold" Storage/Hardware Wallet Options
Cold storage refers to hardware wallets which are physically tangible and act as a signing device. This means that while they are far more immune to cyber attacks, they can be damaged by natural elements (i.e fire), lost, or stolen. However, preventative measures have been put in place such as a recovery code if the actual hardware wallet be lost or damaged. Cold storage is preferred by the community for safe keeping of funds, and should be used for protecting large sums of Bitcoin.
Hardware wallets are thought to be among the most secure, while still being easy to use and making access to your funds seamless. They allow you to control and access your account without ever displaying your private key online - all the processes are done on the hardware wallet itself, requiring you to manually and physically verify transactions with a click of a button.