Bitcoin For Dummies
Book image
Explore Book Buy On Amazon
Some companies offer bitcoin wallet services. They effectively act as a middleman to hold your bitcoins and allow you to spend and deposit as you want, taking responsibility for the administration and security of your account. It also means that the company will ask you for personal information, thus making this a non-anonymous environment.

If you intend to use a third-party bitcoin wallet, ensure you can trust the company behind the service. In the past, there have been several companies that held bitcoins for people, but have rapidly disappeared, been hacked, or gone bust. For example, in February 2014, the major bitcoin exchange Mt. Gox ceased operating and closed suddenly, with lots of people losing their bitcoins that had been stored with them. So choose with care.

In general, exchanges or other third-party companies that hold funds on your behalf should be treated with caution. The country where that company is registered will have its own requirements as to how well regulated that company must be. Because regulations of bitcoin as a financial service or product are still being developed in many areas of the world, you should choose a country with a strong background in regulating financial services, such as the United States, United Kingdom, or the Isle of Man. While regulations are developed, take extreme care when storing funds on a third-party exchange or similar company — and don't store any more than you need or more than you can afford to lose should the worst come to pass.

Various types of third-party solutions are available as web wallets. Here are some examples:

  • Bitcoin exchanges: Some like to hold their coins or a portion of their coins on exchanges to allow them to take advantage of being easily accessible to trade their coins for either fiat currencies like USD, GBP, or EUR, or for alternative crypto-currencies. Although this may be convenient, it is not recommended.

  • Dedicated wallet service: There are dedicated bitcoin wallet service websites with no exchange connection.
  • Mobile wallets: As with all the majority of software released today, companies are offering web solutions for multiple mobile devices.

About This Article

This article is from the book:

About the book authors:

This article can be found in the category: