Bitcoin Wallet Guide

One of the innovations of Bitcoin is the ability to store it without relying on a custodian, like a bank.

If you're holding bitcoin on an exchange or in an ETF, you lose the freedom benefits of bitcoin.

Self-custody wallets unlock the full power of Bitcoin: freedom money.

With a self-custody wallet, you are the only one with the ability to spend or transfer your money. No one can stop you from sending or receiving your money when you use a self-custody wallet.

Self-custody wallets are also called non-custodial wallets.

Custodial wallets are wallets where you are not in control of your money.

These wallets are more similar to the banking system where you must trust a third party to give you access to your money. If your Bitcoin is on an exchange, you are using a custodial wallet.

If you bought a Bitcoin ETF, you are using a custodial wallet that doesn't allow you to withdraw to self-custody.

Custodial wallets can seem convenient, but the custodian has the technical ability to steal all user funds at any time.

Not your keys, not your coins!

Cold wallets store the keys to your Bitcoin in a manner that never exposes them to the internet.

This significantly limits the attack vectors that a thief might use to try to steal your Bitcoin, and is best used for large sums of Bitcoin that you don't need to transfer often.

You can think of a cold wallet as a long term savings account, also known as cold storage.

Hot wallets store the keys to your Bitcoin on a device that is connected to the internet, like your phone.

Hot wallets are generally considered safe, but they could have more security vulnerabilities than cold wallets.

You can think of a hot wallet like you would a physical wallet. You wouldn't store your entire savings in your wallet, but you would store some spending money.

Hot wallets make it much easier to spend your Bitcoin without having to pull your entire savings out of cold storage.

When you set up your Bitcoin wallet, your device will generate a recovery phrase. This recovery phrase (also called a seed phrase) contains 12 or 24 words.

If you ever lose access to your wallet or your device stops working, you can input this recovery phrase into a new wallet to regain access to your Bitcoin.

Your recovery phrase is the ultimate password — protect it at all costs. Anyone who gets access to it can access your bitcoin, so it's crucial to store it safely and never online (no photos, no cloud storage, no email, no notes apps).

Most wallets include a sheet of paper to write down your recovery phrase, but lots of people prefer to back up this phrase on steel instead. This makes it much less likely to lose your recovery phrase in the event of a natural disaster like a fire or a flood.

For one more layer of resilience, you can also memorize your seed phrase as an invisible backup that travels with you.

Jameson Lopp has tested 70 steel backup kits to help you pick the one that is right for you.

View Jameson's metal Bitcoin backup guide here. Or keep scrolling to explore Bitcoin wallet options.