Banking is a Privilege
Banking in the Western world just works. I go to an ATM , withdraw some money, and I’m off to the bars. Or, if I want to save some money and gain a bit of yield for my hard-earned cash, I could simply choose a high yield online savings account. The point is I have choices in how I store and access my money.
Most people in the world aren’t so lucky. Many individuals and families are financially held back by inferior banking systems. For people living Venezuela, Greece, India, or Appalachia banks are not accessible or reliable places to store money.
Bitcoin is a potential solution to underserved populations. Bitcoin, above all, is an innovative store of value that is decoupled from faulty policy, fraudulent banks and geographical isolation. Bitcoin is far from perfect and is rattled with its own internal scaling issues, but it still is an alternative worth investigating.
If you want to get started experimenting with bitcoin, you will need to a bitcoin wallet.
Hot, Cold and Paper Storage
So as you probably imagined a bitcoin wallet is slightly different than a traditional wallet- but not by much. The concept is essentially the same. A bitcoin wallet, just like a regular wallet is a place where you store your money. There are three different types of bitcoin wallets- hot, cold, and paper.
A hot wallet is the wallet that you keep online, it is the most vulnerable- thus the name ‘hot’. It is even more dangerous if you leave your secret keys in trust of a third party (in a bitcoin account there are two sets of keys, private and public). What makes bitcoin different than a bank, is that a bank has direct access to your funds, with a bitcoin wallet only the person who has possession of the secret keys has access to your bitcoin.
Paper wallets are what they sound like, paper wallets involve saving the private public keys on paper. These wallets are a good way to back up a cold or hot wallet. If you are interested in creating a paper wallet here are the instructions. I want to create a paper wallet sometime in the near future, but I’m still figuring out where can I safely store it.
After about several months of using a hot wallet, I figured it was time to up my geek game and get a cold storage wallet. A cold storage wallet is a hardware wallet that stores your private keys. It’s like having Bank of America on your keychain. No, really.
After some research I decided to go with Ledger Nano S. I connect the wallet to my laptop and transfer money to my account using the Ledger Wallet app. These days I buy bitcoin or ether using Coinbase and then promptly transfer the coins to my cold storage wallet.
I’m my Own Bank, Now What?
It is cool that I have complete control over my funds. It is interesting that I can take an unlimited amount of undeclared money on a plane and the TSA would be none the wiser.
Having a bank in my pocket doesn’t rise beyond being a novel experience. But then again, in the words of Brock Pierce, partner of Blockchain Capital, bitcoin is not about me. Bitcoin is a technology for the billions who are shut out of the modern banking system. Bitcoin is for the people who lack the institutions needed to help them save and grow their assets. And who knows, with Brexit and the election of Trump, maybe people living in Western countries will also need to decouple themselves from traditional banking.