Most new investors who have made their first bitcoin purchase struggle to find the best wallet to store their cryptocurrency assets. Guess, why? There are hundreds of bitcoin wallets ready to be downloaded online, although not all of them are up-to-date, or even developed with proper security standards.
Of course, you can simply leave cryptocurrency in the service you bought it. But it’s not a secret that such services are a major target for hackers. Even more, there are many examples of successful hacker attacks being held there recently. Just think about the hacking of the Mt Gox exchange in 2013 when 850,000 bitcoin were stolen. With recent bitcoin rates that are billions of USD.
Some services might start talking you up about their insurance policy that would cover all the customer losses, but would you like to put that to the test? Don’t think so!
In this case, the solution is obvious—you need to store your assets in a wallet. All that remains is to figure out which one to choose, how it works, and all those related questions.
Types of bitcoin wallets and how do they work
Cryptocurrency wallets are like the leather ones that you use in your everyday life with a little difference—they are much smarter. You can hold your digital assets and operate within a convenient interface that helps you to interact with the rest of the network. Everything is on track, like how much, where and when you spent or earned.
If you want to go deeper with investment activity, you would be interested in the way they work. Bitcoin wallets are very much like the safety deposit boxes that can store certificates, jewelry or money. We would be very upset if we lose keys to that safety box because someone might take ownership of the box contents.
Instead of physical keys bitcoin wallets use private keys. They usually look like lots of letters and digits. At some point, it may be confusing, but you want to keep it safe as you will need your private key to access your assets and authorize transfers from your wallet.
Before choosing the most suitable bitcoin wallet, you want to consider how you intend to use your currency. There are different types of such wallets and many variations, let’s check the most popular formats:
If you want to invest bitcoins which involves long-term storage, an offline wallet should be safer, among them are desktop, paper and hardware wallets. On the contrary, if you intend to use them every day, you would prefer the convenience of mobile or online wallets.
Besides that, there are many other differences between those types. Bitcoin wallets come in different formats, explicitly designed for different kinds of devices. As a matter of fact, you can even avoid storing your digital assets in a digital manner by merely using a paper wallet. So let’s find out which one is the best for you.
Hardware bitcoin wallets
Hardware wallets are secure offline devices dedicated to providing an additional layer of security to your assets. As they can’t be hacked due to offline status.
Here’s how they work. Hardware wallets have a secure chip inside. It means that when you want to send your bitcoins you connect them to a computer and there is no need to enter your private key there. A simple pin code input on the hardware is enough. This way you can use it even on a malware infected computer.
In case your something happened with your hardware (like it was broken or lost), you can quickly restore your access to the assets on a new device. For that, you have the ‘seed words’ that you get with your hardware wallet. In general, it looks like a string of random words.
Some large investors keep their hardware wallets in secure places, like bank deposit boxes.
As a drawback, hardware wallets aren’t free. Actually, being the most secure means of currency storing effects in the highest price. Their prices range from $50 to $300. It is worth only if you have a lot of bitcoins. Due to this fact, in general, they are not so popular, so there are just a few really famous models. Let’s check those!
Ledger Nano S
The Ledger Nano S is the cheapest, therefore the most popular model among Ledger Nano wallet. It costs only 79€. The very first version was released in August 2016. It is actually a compact USB device with a smart card. It has a screen so you can access your bitcoins even without connecting it to a computer. Although the software has fewer features as the models below.
The Trezor hardware wallet allows storing a number of currencies. It was launched in 2013. That includes Bitcoin, Litecoin, and Ether. It has lots of advanced features, like passwords management, etc. Not to mention, its safety properties considered to be the strongest. In combination with excellent user-friendliness, Trezor has become the most popular model. As usual with hardware wallets, its cost ($99) makes it worth only for those who own large amounts of currency.
KeepKey is a secure bitcoin hardware wallet that was released in 2015. It has more advanced features than hardware wallets mentioned above. It is an excellent choice for the already experienced user. Due to the high level of security, digital screen, and metal body costs $99. It has a larger size than Trezor and Ledger Nano S.
It supports many currencies and is protected against both physical and digital theft due to top-notch security properties.
Desktop bitcoin wallets
Desktop wallets are just a type of software wallets that are based on computer software, so you run them on your laptop or desktop. A large group of different formats represents software wallets. Some are designed for the only one currency, like bitcoin, others can store multiple currencies. Some of them can only be downloaded, and the others require network servers usage.
The most famous are the desktop, mobile and online. Let’s start with the first ones.
Desktop wallets are a piece of software installed on your PC or laptop that stores your currency locally. It helps to generate and keep private keys and bitcoin addresses and, of course, provides an opportunity to receive and send bitcoin payments. No third party interfaces involved.
However, you need to be cautious, as if your computer is hacked you might lose all your digital assets. It results in a significant number of users who prefer “cold” storage. That’s when people use computers without access to the internet.
Also, desktop wallets are not so convenient in the case when you need to pay on the go. Especially now when most users prefer more portable solutions. It is where mobile wallets stand out. More about them later, now let’s see the examples of desktop wallets.
This one is considered to be the most important desktop wallet that has the full pack of features that you might need. The core node that is attached to it gives all the control into your hands through a graphical user interface (GUI). Bitcoin Core creates a perfect balance between access and power.
Electrum is easy to use, performs with high speed, robust security, and exceptional stability. This makes it probably the most popular desktop wallet. It has many cool features, like cold storage opportunity, integration with hardware wallets, connecting through Tor, etc. You can easily set transaction fees, create invoices, and much more.
It is also available in an Android version.
However, the interface is quite complicated, so for beginners, it might be not the best match.
Among the most tangible advantages, Exodus offers to store different cryptocurrencies and has a built-in exchange feature. It allows exchanging currencies fast and efficiently.
It is available in both desktop and mobile versions. Copay can only store bitcoin. Multiple users can access a single wallet.
Due to all the above advantages in combination with the high-security level and ease of use even for beginners, Copay has gained extreme popularity.
Another multi-platform (desktop & mobile) free wallet that can store lots of cryptocurrencies and provide exchange between them within a few touches of the button.
Mobile bitcoin wallets
Mobile wallets essentially operate through an app on the mobile device. The primary advantage is that they let you handle bitcoin transactions on the go. On the downside, it is the least secure wallet due to a whole mobile phones security level.
There are two formats of funds storage: locally on your phone or just by giving them access to online storage. The first format is as safe as the desktop wallets are, the second one has almost the same safety level as online wallets.
Coinbase is considered one of the best bitcoin wallets for iOS. It comes with a delightful, clean design. By the way, it offers the same online exchange properties as the Coinbase web version.
It has minimalism in design that iOS users like very much. No extra charges while making transactions. You don’t have to be a bitcoin guru to store your funds there. Breadwallet stands out among the other mobile wallets with its slick implementation.
Mycelium is as visually pleasing as Electrum and supports your Trezor wallet right from your phone. A micro USB to USB adapter is enough to transfer your assets to your phone. This is what distinguishes Mycelium from the other Android mobile wallets.
Online bitcoin wallets
Online wallets are web-based wallets. It means that they can be accessed from anywhere and linked to desktop or mobile wallets. Which makes them the most convenient ones. Of course, nothing’s ever perfect, so the major drawback of storing your private keys by the website owners. You want to put a lot of trust in its security level.
It is a bitcoin wallet that works on the web, desktop, Android, and iOS. It is compatible with the most famous hardware wallets. Among exclusive features, it requires a manual signature every time a transaction performed. Without this, your coins won’t move anywhere. It improves security greatly.
Paper bitcoin wallets
It is the simplest bitcoin wallet as it is just a printed piece of paper that contains a cryptocurrency address and private key that can be accessed with a QR code. This is another form of cold storage. It is not connected to the internet, so in no way can be hacked. Not to mention, its cost in comparison to other forms of cold storage.
On the downside, it is much harder to set up and use than software wallets and, in case you lose your paper wallet without a backup copy being made, you won’t be able to restore the access to your funds. By the way, to use your assets stored in a paper wallet, you would still need a device. If this device is malware infected or hacked then… well, guess yourself!
Also, it is not convenient for everyday use, as it’s quite a hassle to access your wallet each time. And if you are a beginner, you can easily lock yourself from using them.
Bitcoin Paper Wallet
It is an absolutely free space where you can create private and public keys in order to store your bitcoins. The final stage would be to use your own printer to print out your paper wallet. As a result, you will receive a certificate containing a QR code with all the keys.
Bitcoin popularity grows each day. Someday it may result in its influence far beyond tech companies. The increasing range of cryptocurrency wallets provides more and more features for those who see the nowadays and future potential of the wallets.
Although no approach is 100% secure for your funds’ storage now, you have more opportunities to choose the best match for you. If you prefer safety over all other features, select a hardware wallet. In case convenience is the number one requirement for you, a mobile or online wallet takes the shot.
Ideally, you can only combine the usage of different wallet types. Large amounts of assets can be held within cold storage. Surely you can transfer smaller amounts into your mobile or online wallet for everyday use.
You can choose any method, just be sure to make and keep backups in a safe location!