It's a good thing newbies have a place to post simple questions!
What is the value of having a local (on your computer) software wallet when exchanges and other acquisition sites such as localbitcoins.com require you to keep your bitcoins in their wallets?
And a follow-on question: can a local wallet coordinate wallets from multiple sites for easy viewing?
A local wallet is much more secure. Exchanges and web wallets have a history of getting hacked. That includes LBC. So don't keep more than you can afford to loose with an exchange site.
In fact you should keep a tiered level of wallets:
- Riskiest - exchange, web wallet - very small amounts
- Moderate risk - Desktop wallet i.e electrum, bitcoin-qt, armory or multibit - amounts that you intend to use for transactions in the near future i.e say 1 month time frame.
- Safest - offline wallet like offline electrum or armory or a paper wallet - large amounts and long term savings i.e. funds that you can't possibly afford to loose.
Thank you for the detailed reply! If I understand correctly, one would be importing the private keys from various online wallets into their local wallet? Does the originating exchange/site no longer hold the coin?
https://en.bitcoin.it/wiki/How_to_import_private_keys provides instruction on importing private keys, but they also stress that it isn't advisable to do so - especially if one doesn't fully understand the process.
I am understanding that your advice is to keep everything locally, which process includes importing the private keys from whatever sites where one has bitcoin. So the value of local storage outweighs the risk of the import.
