Web wallets are probably the simplest and most convenient way to store your Bitcoin. When you store your currencies on the stock exchange, you are actually using a wallet that no one else (the swap) can access. For security, consider a service that does not actually have custody of your Bitcoin. For example, Blockchain.info offers a wallet whose private key is only known to you. This means they do not have access to your Bitcoins. This means that if you lose your login information, they cannot help you recover your coins. If your computer is damaged, you can lose your Bitcoin via keylogging or “middle man”.
Cryptotype # 2
Software wallets are another common way to store your cryptocurrency. A number of these are available, but some are proprietary (closed source). It’s not necessarily bad, but it does mean some kind of trust is involved. For the greatest security, use open source software wallets like Bitcoin-Qt or Electrum. Always encrypt and back up your wallet, making sure you don’t lose your passphrase. If your wallet is not encrypted, encrypted with a weak passphrase, or your computer is compromised, hackers may be able to access your funds.
Cryptotype # 3
Hardware wallets are the most secure type of Bitcoin wallet. There are different types, but they usually look like a small USB stick or a key. These wallets store your private seed in a way that makes it accessible to hackers. Manufacturers of hardware wallets boast that their wallets are safe to use, even with a poor computer. Sending money is as simple as loading small software onto your PC, entering the transaction details and then confirming the transaction by pressing a button on the hardware device. Hardware wallets, such as the Ledger and Trezor, require a long sequence of random words when installing the device. If you ever lose your device, your wallet can be retrieved using “seed words”. Make sure you keep them in a safe place. Make sure you update your firmware frequently, as both Ledger and Terzor have discovered vulnerabilities and patches have been issued accordingly.
Cryptotype # 4
Paper wallets can be produced through certain open source programs and production of a Bitcoin address and associated private key. This information is then printed or copied and stored in a secure place. Some users will even go so far as to engrave their private keys on a piece of metal to ensure fire resistance. For those less skilled in metal work, there are devices like CryptoSteel that allow for an easier way to store your private key in a fireproof manner. Make sure your wallet generator is open source and reliable, and create your wallet on an offline computer. If your computer is compromised and connected to the Internet when you make your wallet, hackers can steal your private key.