Storing your bitcoins
The banking system has a legacy of offering various financial services to its customers.They offer convenient ways to spend money, such as cheques and credit cards, but the storage of money is their base service.
For many centuries, banks have been a safe place to keep money. Customers rely on the interest paid on their deposits, as well as on the government insurance against theft and insolvency. Savings accounts have helped make preserving the wealth easy, and accessible to a large population in the western world.
Yet, some people still save a portion of their wealth as cash or precious metals,usually in a personal safe at home or in a safety deposit box. They may be those who have, over the years, experienced or witnessed the downsides of banking: government confiscation, out of control inflation, or runs on the bank. Furthermore, a large population of the world does not have access to the western banking system. For those who live in remote areas or for those without credit, opening a bank account is virtually impossible. They must handle their own money properly to prevent loss or theft. In some places of the world, there can be great risk involved. These groups of people, who have little or no access to banking, are called the “underbanked”.
For the underbanked population, Bitcoin offers immediate access to a global financial system. Anyone with access to the internet or who carries a mobile phone with the ability to send and receive SMS messages, can hold his or her own bitcoin and make global payments. They can essentially become their own bank.
However, you must understand that Bitcoin is still in its infancy as a technology. Similar to the Internet of circa 1995, it has demonstrated enormous potential, yet lacks usability for a mainstream audience. As a parallel, e-mail in its early days was a challenge for most users to set up and use, yet today it’s as simple as entering your e-mail address and password on your smartphone. Bitcoin has yet to develop through these stages.
In most normal cases, we only keep a small amount of cash in our hand wallets to protect ourselves from theft or accidental loss. Much of our money is kept in checking or savings accounts with easy access to pay our bills. Checking accounts are used to cover our rent, utility bills, and other payments, while our savings accounts hold money for longer-term goals, such as a down payment on buying a house.
It’s highly advisable to develop a similar system for managing your Bitcoin money. Both local and online wallets provide a convenient way to access your bitcoins for day-to-day transactions. Yet there is the unlikely risk that one could lose his or her Bitcoin wallet due to an accidental computer crash or faulty backup. With online wallets, we run the risk of the website or the company becoming insolvent, or falling victim to cybercrime.
By developing a reliable system, we can adopt our own personal ‘Bitcoin Savings account to hold our funds for long-term storage. Usually, these savings are kept offline to protect them from any kind of computer hacking. With protected access to our offline storage, we can periodically transfer money to and from our savings. Thus, we can arrange our Bitcoin funds much as we manage our money with our hand wallets and checking/savings accounts.