What is a Bitcoin Wallet?
A bitcoin wallet is similar to your bank account. It is where you store your bitcoins and through which you can send and receive bitcoins; but to be more accurate, bitcoin wallets do not store your bitcoins because Bitcoin is a digital virtual currency not a physical currency, Bitcoin wallets actually store your private and public keys which are digital keys; that provide you with access to your bitcoins’ addresses and store the digital signatures; that are used to make Bitcoin transactions. Different Bitcoin wallets come with different features and mechanisms.
Choosing your Bitcoin wallet
Choosing the best Bitcoin wallet is a very important matter, especially when thinking about versatility, safety and privacy. But keeping your Bitcoin savings safe and secure, as we will show you in this article; doesn’t have to be a complicated matter as many people think. In this article we will tell you what to look for when choosing your Bitcoin wallet; and also how to install and use one.So if you want to know what types of Bitcoin wallets are available; how you can get one and how to use it, this article is for you.
How to choose the best Bitcoin wallet for you?
So how do you choose a best bitcoin wallet? That’s the question that this article will answer. First of all, start with how you plan to use your bitcoins: How frequent will you use Bitcoin? What will you use Bitcoin for? How much money will you invest in Bitcoin? Will you hold a considerable amount of bitcoins for long term investment? Do you want to use Bitcoin as a method for payment? Are you new to the world of Bitcoin?
Answering these questions help you set your priorities and decide which Bitcoin wallet is suitable for you. If you’re going to invest massively in Bitcoin then security should be on the top of your priorities. If you want to use bitcoins for frequent and instant payments; then you should use a simple and reliable Bitcoin wallet that can be accessed from your mobile or laptop.
Things to consider when choosing your bitcoin wallet
Since that the most important use of Bitcoin wallets is that they act as an interface to the world of Bitcoin; where you need them to send, receive and store your bitcoins and without a one you won’t be able to get to the world of Bitcoin. There are three important things to consider when choosing your Bitcoin wallet in order to pick a one that matches your needs :
The system of bitcoin is secure in itself, it is impossible for a bitcoin to be double-spent; there’s no centralized authority that controls the flow of bitcoins; and every transaction requires the approval of all the nodes of the system to happen. However, the Bitcoin wallets that are used to store bitcoins and used for Bitcoin transactions may be vulnerable to cyber threats; if the right security precautions were not undertaken.
Bitcoin wallets store your private keys which shouldn’t be known or acquired by anyone but you and they must be kept safe and secure; because if a hacker managed to gain access to your private keys, they can steal your bitcoins; and since that Bitcoin transactions are irreversible, your stolen bitcoins will be lost forever. So a good Bitcoin wallet that truly protects the security of your bitcoin assets must have an insurance; against cyber-attacks and provide protection for your private keys.
There are also security measures that you can take in order to protect your bitcoins; like making regular backups to your Bitcoin wallet which will help you protect your bitcoins; and recover them in case your computer or mobile is stolen. And in case your Bitcoin wallet is provided by a Bitcoin wallet provider or an exchange, you have to ensure the commitment of the company to the security of their clients’ holdings.
A highly recommended choice for those who’re concerned with security is using a Bitcoin wallet that implements the multi-signature technology.
For more information about multi-signature wallets, please watch this video.
Your Bitcoin wallet is what you use to transact with other Bitcoin users in the world and to store your bitcoins, and that’s why one of the most important criteria for choosing the best bitcoin wallet is Simplicity. It’s better (especially if you’re new to the world of Bitcoin) to choose a wallet that is easy to use and has a simple user interface that is easy to understand.
A simple bitcoin wallet should:
- Have a good and simple user-interface that’s easy for a beginner to learn and use.
- Be easy to configure.
- Be tailored for enhanced user-experience.
- Be quick to access.
One of the factors that attracts people to Bitcoin is the absence of a centralized authority; to control the flow of the cryptocurrency or have access to the transaction data which in turn means more privacy. However, different bitcoin wallets come with different levels of privacy; for example, many bitcoin wallets (especially online Bitcoin wallets) are provided by Bitcoin exchanges and wallet providers; and while some people may consider the involvement of a third party a threat to their privacy; many may think of it as a better option for the simplicity it offers and while a Bitcoin wallet that provides the user with complete management of Bitcoin funds may be considered a perfect choice for many; many others prefer to put the responsibility of keeping their bitcoin funds safe and secure on a trusted third-party that has a good reputation. It’s also worth to note that the servers of best bitcoin wallets providers have no access to the users’ funds. So it’s up to you and the level of privacy you are looking for.
And remember that protecting your privacy will always be part of your responsibility no matter what type of bitcoin wallet you choose, for example, in case you decided to use a software bitcoin wallet that will be downloaded on your computer, you have to make sure that your computer is protected against malware threats, viruses, Trojans and cyber threats, and you have to make sure that the software bitcoin wallet has a good reputation in the world of Bitcoin.
What are different types of Bitcoin wallets?
Before you choose the best Bitcoin wallet, you have to set your priorities straight, because there is no such a thing as a perfect Bitcoin wallet and in a way or another you’ll have to compromise one advantage for another. A Bitcoin wallet that maintains your privacy may not be easy to use, and a bitcoin wallet that’s simple to learn and use may not provide high levels of security.
Hardware wallets, often called Cold wallets or Cold storages as they are completely disassociated from the Internet, are hardware smart devices that are used to store the user’s private keys and bitcoins.
The problem with software Bitcoin wallets and online Bitcoin wallets is that hackers can hack into your software or into your computer and steal your private keys, and thus have access to your bitcoins. Also many people dislike the idea of having their private keys in the possession of a third-party which is the case for Online wallets. And that’s what distinguishes hardware wallets from software wallets and make them a better option for safety and security.
In the case of Hardware wallets, your private keys are generated and stored offline (in a specific part of the microcontroller of the hardware wallet that’s dedicated for that) and in order to spend your bitcoins the hardware wallet must be connected to your computer (Your private keys will not be transferred to your computer and will not move from your hardware wallet).
Benefits of Hardware Wallets
The hardware wallet can also be secured with a PIN (as you will see in our example below), which makes it extremely hard for someone to steal your bitcoins and easy for you to retrieve your bitcoins in case your hardware wallet (the little hardware device) is stolen or lost.
Since there are no reported incidents of bitcoins stolen from hardware wallets, Hardware wallets are often seen as the best choice for storing large amounts of bitcoins. However, they may not be a practical solution for many users due to their complexity when compared to other wallets, and also because they require a considerable amount of free space on a computer in order to store the data of the transactions that happen every day.
Hardware wallets also, unlike most of the bitcoin wallets, cost money but again it is the most secure option so it’s worth it.
How to setup a hardware wallet?
Having mentioned the advantages and disadvantages of hardware wallets and discussed them, we are going to show you how to use one.
Since that Trezor is the most known hardware wallet and the first hardware wallet in the world of Bitcoin, we are going to use it in our procedure, but of course you’re free to choose any other hardware wallet and almost all of them work the same way.
1 – Connecting it to your computer. The first thing you need to do is plugin your hardware wallet to the computer/laptop that you’re using. The hardware device is something like a dongle.
And it comes with a cable that allows it to be connected to the computer as a USB device but you can use any other cable as long as it does the job.
2 – Downloading the extension or the software. On your computer, you need to visit the website of the hardware wallet provider which in our case is www.mytrezor.com in order to download the extension/software that functions as an interface to your bitcoin wallet.
On the website you’re given two choices/options to choose from, download an extension for your browser or download a software program.
Let’s go with the first option since they both work almost the same way and of course you are free to download the software but there’s no big difference between them they both have nearly the same features.
3 – Adding a label to your device. This is not really important, you can add any label you want to your device.
4 – Adding a PIN number for your device. Now you’ll be asked to add a PIN number for you device and this is a very important step. On the screen of your personal computer/laptop you’ll find 9 boxes resembling the 9 digits of the decimal system, but you’ll notice that the 9 boxes don’t have numbers inside them and that they’re almost empty. Now if you look at the screen of your hardware wallet you’ll find the 9 digits but in a specific order. Now all what you have to do is choose your PIN number and set it using the 9 boxes on the screen of computer with respect to the order and sequence of the 9 digits on your hardware device. So it’s simple despite how complicated it may looks from the first sight, the buttons on you see resemble the numbers you see on the screen of your device. So to know what digit each button resembles you need to look at your device.
Setup and use a hardware wallet
Now you’ll be asked to re-enter and confirm the PIN number that you’ve chosen and entered , but be careful because the order of the digits on your hardware device has changed. So you’ve to re-enter your PIN with respect to the new order of the digits that appear on your hardware wallet.
5 – Writing down your recovery seed. Your recovery seed is a list of secret words that help you recover your bitcoins in case you lose your hardware wallet.
Now after setting up your PIN number, you’ll receive specific number of words on your hardware wallet and you’ll be asked to write them down on the recovery card that comes with your wallet.
You’ll receive the words again on your hardware wallet, now all what you have to do is check the words that you’ve already written on your recovery card against them.
Now your bitcoin wallet is ready for use and you can use the extension of your browser as an interface to your wallet to send, receive, store and trade bitcoins.
Ledger Nano is one of the best Hardware wallets available and it’s less expensive than Trezor. Here’s a tutorial on how to setup and use Ledger Nano S.
Desktop wallets can be downloaded on laptops and personal computers. Most Desktop wallets can be set up to require a password on every bitcoin transaction that is to be made, so in case someone stole your computer/laptop, he won’t be able to steal your bitcoins. Which means more safety for your bitcoins.
Desktop wallets are also considered by many to be one of the safest options because it gives the user full control over their funds and the wallet is installed on the user’s computer/laptop.
Although desktop wallets make transactions from your personal computer/laptop easy , they don’t provide a practical solution for those looking for a wallet that can be used for everyday instant payments due to the physical limitations on the movement of the devices on which these wallets are installed.
How to set-up a Desktop Wallet?
1 – Go to www.bitcoin.org.
2 – Click on the ‘Get started with Bitcoin’ button on the homepage.
3 – Click on the ‘Choose your wallet’ button.
4 – Now you have to choose the type of wallet that you’ve decided to use, in our example we’ll use Desktop wallet.
5 – Click on the ‘Desktop’ button and choose the operating system of your computer/laptop, for our example we will choose Windows.
6 – You’ll be given different Bitcoin applications to choose from. However you’re not limited to these options and you may download any other trusted Bitcoin wallet from anywhere else, but it’s highly recommended to choose one of these bitcoin wallets as they are trusted.
For our example we’ll use Bitcoincore, however, you’re free to choose any other wallet.
7 – Click on the ‘Install’ button.
8 –Open the .EXE file to setup your bitcoin wallet.
9 – You maybe asked to choose the directory in which your data will be stored, and you can use any directory you want of course (as long as the required free space is available).
10 –Now you have your Bitcoin wallet ready for use.
Mobile Bitcoin wallets
Mobile Bitcoin wallets are applications that can be installed on mobile devices to store bitcoins and use them.
The most notable advantage for mobile wallets is that they are versatile. You can use your mobile wallet for frequent and instant payments, you can use it online purchases, you can use it in retail stores, you can use it from anywhere and in anytime. Many mobile wallets implement QR code technology which makes instant payment easier and thus can be used for everyday transactions and in-store payments. Many mobile wallets also support Bluetooth payment which makes it easy to use Bitcoin to pay in-person, some even offer multiple wallets for one account which means more versatility and there are many mobile wallets that have backup features.
If you use bitcoins on a regular basis, then you should download a mobile wallet.
There are many mobile wallets available for download in Google Play Store, App Store and Windows store for Android, IoS and Windows phone devices.
Paper Bitcoin wallets
A paper wallet is a physical document where the data required to generate private keys is stored and that’s why a Paper wallet is considered to be a cold storage just like the Hardware wallet.
It is recommended to make sure that the computer is not connected to the internet during the process of paper wallet generation. For more security, it’s better to disconnect your printer from the internet and make sure it does not keep copies of printouts internally.
It may be difficult or complicated to back up your paper wallet, however , you can make physical copies of the paper itself.
Don’t forget that your paper wallet is just a piece of paper that can be easily torn, damaged, destroyed or stolen, so you have to protect it.
So if you dislike the idea of storing your private keys digitally, then a Cold storage like a Paper wallet or a Hardware wallet is the perfect choice for you, because in the case of Cold wallets, you’re the one responsible of keeping your bitcoins safe and secure.
How to create a Paper wallet?
In case you want to know how to create a paper wallet, the steps below will instruct you on how to create a paper wallet by yourself.
1 – Visit www.Bitaddress.org
2 – On the homepage you’ll be asked by the website to move your cursor around or type random characters into a text box till it becomes 100 % on the percentage bar that’s on the homepage.
3 – Now you’ll be provided with public and private keys with their QR codes. Do not scan or store them.
4 – Click on the ‘Paper Wallet’ you see above and select the number of addresses that you’d like to generate.
5 – For further security, you are given the option to encrypt your private key with a Passphrase using BIP38 encryption.
6 – In case you don’t like the available design you can click the checkbox for ‘Hide Art’.
7 – Click on ‘Generate’ button in order to generate your Paper wallet.
8 – After the generation the Paper wallet, click on the ‘Print’ button in order to make hard copies of your paper wallet. You can also save your Paper wallet in PDF format.
Online Bitcoin wallets
Online Bitcoin wallets is the easiest type of Bitcoin wallets that you can use and they are very versatile. What makes Online wallets versatile is that they can be accessed from any device that is connected to the internet, which makes it easy to use for regular payments and frequent transactions.
However, in the case of online wallets, the responsibility of securing your bitcoins lies heavily on the shoulders of the service provider , as your private keys are stored on servers that belong to the wallet provider.
Despite that most of the online wallets providers have neither full access to these servers nor access to the transaction data of the users, the users’ wallets may still be vulnerable to cyber attacks as these servers are attractive targets for hackers. So make sure that the wallet provider you choose has insurance against cyber threats and an established reputation in the world of Bitcoin.
If you are new to the world of Bitcoin, and you are not willing to invest heavily in Bitcoin, then it may be better for you to start with an online wallet.
Create your own online bitcoin wallet
Bitcoin online wallets are very easy to use, you don’t have to download a software or an application.
1 – Go to www.bitcoin.org.
2 – Click on the ‘Get Started with Bitcoin’ button.
3 – Now click on the ‘Choose your Wallet’ button.
4 – Click on the ‘Web’ button.
5 – You’ll be given different Web wallets to choose from. In our example we will choose BitGo , but you’re free to choose any other wallet.
6 – Now all what you have to do is click on the ‘Visit Website’ button.
7 – You’ll be taken to the Wallet’s website where you will create your Bitcoin Wallet.
Top 10 best bitcoin wallet in the market
GreenAddress is an online bitcoin wallet with multi signature for additional security. This wallet is available for Google Chrome, Apple iOS and Android versions.
The SpectroCoin is an all in one Bitcoin Solution. It offers a wide range of solution including, a bitcoin exchange and also a secured bitcoin wallet.
The Bread Wallet for bitcoin was initially started out to serve iPhone / iOS users. Later extended their support to Android users also. This bitcoin wallet is popular because of its simplicity and ease of use nature.
The Mycelium wallet is very popular among the advanced bitcoin user community. It is a Hierarchical Deterministic wallet – meaning, the wallet generates a new bitcoin address from a special piece of program. It also have excellent support for other hardware based wallets like the TREZOR and the LEDGER.
The “Bitcoin Wallet” was the first bitcoin wallet developed for Android mobile devices. It is very simple to use, easy to create backup and is popular among both new and advanced users alike.
The Airbitz is yet another bitcoin mobile wallet and highly suitable for day-to-day use. It is integrated with Fold, enabling users to enjoy 20% discounts at the Starbucks when you make bitcoin payments.
The GreenBits is developed based on the native version of GreenAddress. Because of this, it is quite simple and fast. It also has excellent support for other hardware based wallets like the TREZOR and the LEDGER.
The Armory is one of the most sophisticated and mature bitcoin wallet out there. It is highly secure and packed with features and it is very popular among technical users. As it is advanced, the users have complete control over all their private bitcoin keys.
The Bitcoin Core is the official wallet that is created for the first cryptocurrency, the bitcoin. It is not popular in the bitcoin community as it lack several features and also it is slow. Bitcoin Core connected through the Tor is believed to be one of the best ways to use your bitcoin anonymously.
The Electrum is one of the most popular bitcoin wallet. It is desktop based and very easy to use. Because it is fast and also supports cold storage, it can be used offline. In addition to that, the Electrum also offers features like connecting through the Tor, multisig and integration with other hardware based wallets.
At the end, it’s all up to you, so get your priorities straight and choose a Bitcoin wallet that meets your preferences and matches your needs!
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