There are different ways to solve the problem of how to store Bitcoin.
Bitcoin Storage On Bitcoin Exchanges
Bitcoin can be stored on a Wallet hosted by a Bitcoin Exchange where the Bitcoin Exchange stores the Bitcoins on behalf of the Owner.
Ultimate control of Bitcoin stored on a Bitcoin Exchange Wallet lies with the Bitcoin Exchange that holds the Private Keys to the Bitcoin Wallets for the Bitcoins stored on its Bitcoin Exchange.
Storing Bitcoins on a Bitcoin Exchange can be considered a Cloud Storage solution for storing Bitcoin.
The main disadvantage with storing Bitcoin on a Bitcoin Exchange is that if the Bitcoin Exchange is hacked, then the Bitcoin Exchange Wallet storing your Bitcoins on the Bitcoin Exchane can be compromised and the Bitcoin stored on the Bitcoin Exchange lost.
The next type of Digital Waller for storing Bitcoin is a Private Hot Wallet.
Individual Hot Wallets
Individual Hot Wallets are Private Bitcoin Digital Wallets connected to the Internet. They are used on internet-connected devices like mobile phones and computers.
The main risk in using an Individual Hot Wallet to store Bitcoin is that since Hot Wallets remain connected to the internet, their security can be easily compromised even though they may be convenient to use and set up.
This type of Digital Hot Wallet can be downloaded from sites Bitcoin.org.
The next type of Digital Wallet which is also the safest way to store Bitcoin is called a Cold Wallet.
A Cold Wallet is not connected to the Internet and can be in the form of an external USB Drive.
For this reason, there is a much less risk that Bitcoin stored in Cold Wallets can be stolen.
Cold Wallets store Bitcoin by saving the digital address of a particular Wallet off-line.
Cold Wallets issue Private Keys to access the Bitcoin stored on the Cold Wallet using software that is not connected to the Internet but that still allows Bitcoin Owners to view the Bitcoin stored on the Cold Wallet on the Blockchain without the risk of jeopardising the Private Keys giving access to the Bitcoin that is stored on the Cold Wallet.
All things considered, Cold Wallets are the safest way to store Bitcoin because the Bitcoin is stored off-line meaning there is less chances for a Cold Bitcoin Wallet to be compromised like Hot and Bitcoin Exchange Wallets may be jeopardised because they are connected to the Internet.
Despite the risks associated with the different ways to store Bitcoin mentioned above, it is also possible that stored Bitcoin can be lost due to the Owner of a Bitcoin Wallet losing his or her private keys themselves.
In addition, losing a Computer or other device on which a Bitcoin Digital Wallet is saved as well as Computer malfunctions on a Computer on which Bitcoin is stored in a Digital Wallet may also result in the loss of the Bitcoin stored in the Digital Wallet on that Computer or device.