While you have a bank account to keep your money safe, make and receive payments, among other things, in the Bitcoin world you have a crypto wallet. Crypto wallets allow you to receive Bitcoins, send them to others, or simply store them.
When you have the need to use a wallet, you need to know there are three main types of wallets:
This is usually the kind of wallet most people tend to prefer. You will need to install a software on your computer or mobile device from where you control it. Depending on the wallet you choose, you may have some problems installing it and maintaining it.
There are many different software wallets from where you can choose. Most people tend to prefer the “original” wallet – the Bitcoin Core. One of the best advantages of this software wallet is the fact that it works across multiple operating systems including Mac, PC, and Linux. Plus, as soon as you install the software, the Bitcoin client will immediately try to establish a network and download the block chain. Please notice that before you are able to make any transaction, you will need to have all the blocks in chain first.
However, you have other options that might suit you best. In case you are worried about your security, one of the best software wallets you can have is the Armory. However, if you only use Mac and your mobile device, then one of the best options you have on the market is Hive. Plus, Hive is also designed especially for beginners.
As you can see, each software wallet has their own specifications. So, make sure to check them out and see which ones suit you best. One factor that you should consider, however, is the wallet’s weight. Some software wallets are able to take less space which allows them to perform faster. These include Electrum and Multibit, for example. Even though they are less secure because they only require a small part of the block chain, you may prefer to use them.
Armory is the most mature, secure and full featured Bitcoin wallet but it can be technologically intimidating for users. Whether you are an individual storing $1,000 or institution storing $1,000,000,000 this is the most secure option available. Users are in complete control all Bitcoin private keys and can setup a secure offline-signing process in Armory.
Armory requires advanced user knowledge and is not known for being user friendly.
Bitcoin Core is the “official” Bitcoin client and wallet, though isn’t used by many due to slow speeds and a lack of features. Bitcoin Core, however, is a full node, meaning it helps verify and transmit other Bitcoin transactions across the network and stores a copy of the entire blockchain. This offers better privacy since Core doesn’t have to rely on data from external servers or other peers on the network. Bitcoin Core routed through Tor is considered one of the best ways to use Bitcoin privately.
Bitcoin core has no mobile app and no web interface. It makes difficult to use this wallet without having your own personal computer on hand.
Electrum may be the most popular desktop wallet, due to its speed and ease of use. Electrum can also be used as cold storage if you have an extra computer that can be used offline. Additionally, Electrum offers other features like connecting through Tor, multisignature wallets, integration with hardware wallets, and more.
Yet, the reliance on external servers could present security threats.
Mycelium is a favorite among experienced Bitcoin users. It’s an HD wallet with many advanced features, like support for hardware wallets TREZOR and Ledger, watch-only accounts, cold storage spending, and Tor.
There are no web or desktop interface, so you’ll have to use your smartphone to access this app
AirBitz (Android and IOS)
Airbitz is a decentralized, secure and backed up Bitcoin wallet. Airbitz manages accounts with usernames and passwords, but doesn’t have access to your funds. This type of account creation is easier for less technical users who may have trouble backing up or understanding HD seeds.
The nice thing about Airbitz is that it also supplies you a directory of Bitcoin accepting businesses around you.
Since web wallets are hosted by a third-party company, you need to be sure that you trust this company to handle your coins. However, one of the main advantages of web wallets is the fact that they are usually a lot easier to use.
All your private keys are stored on a server that is managed and controlled by an admin group. So, you can easily access them from any place, which is an amazing advantage. However, many of these web wallets have had security breaches throughout the years. So, you may need to consider the risks and benefits of web wallets.
some of the most popular web wallets include Xapo, Circle, and Coinbase. There is a detail regarding Xapo that you may like. Xapo includes an extra security measure that is called the cold-storage vault. Even though it may not be as safe as having your own software wallet on your computer, the truth is that they are better than most other web wallets because of this extra feature.
GreenAddress is a multisig web wallet, with apps available for Chrome, iOS, and Android. Better yet, Green Address’s is well regarded as being user-friendly. This makes Green Address one of the most flexible wallets around. Supports multi-signature features and has strong security and privacy features.
If you are one of those people to whom security is never enough, a hardware wallet may be your best choice. Simply put, a hardware wallet is actually a physical device that facilitates your payments and holds your keys privately. No one else can access them and they are immune to Trojans and viruses.
Ledger Nano ($58)
The Ledger Nano is a smartcard based hardware wallet. Private keys are generated and signed offline in the smartcard’s secure environment. The Nano is setup using the Ledger Chrome Application. A random 24-word seed is generated upon setup and backed offline by writing it down on a piece of paper. In case of theft, damage or loss, the entire wallet can be recreated with the seed. A user selected PIN code is also assigned to the device to protect against physical theft or hacking.
The Ledger Nano may be used on any computer, or Android phones with Mycelium or GreenBits.
The price is above the market average, and as all cold wallets, the surplus of security which it brings leds less usability.
The TREZOR differs from the Ledger Nano in that it’s a very tiny computer rather than a smartcard. Private keys are still generated offline.
TREZOR also generates a 24-word seed upon setup. The TREZOR has its own built-in screen where the seed is displayed and copied down during backup. Since the TREZOR is an offline device it offers extra security since the seed isn’t displayed on an online computer.
An additional passphrase can be added to the 24-word seed. This provides extra protection since anyone who finds someone else’s 24-word seed is free to access the funds. If the optional passphrase is added, an attacker still wouldn’t be able to access funds without both the seed AND the passphrase. If the passphrase is forgotten, it cannot be recovered.
The only problem could be its price, relatively high compared to its competitors.
No matter which one of these you choose, you should backup your wallet.
It will protect you against computer failures of human mistakes. It also allows you to recover your wallet if your computer or your phone is stolen.
You should also encrypt your wallet in order to protect yourself against thieves. Bitcoin is different than the Bank, you are very limited options to recover your password if someone stole it or if you lost it. So pay attention to use a strong password, and to never lose it.
Finally, use combinations of wallets. Use a mobile wallet as your checking account, and a hardware or secure offline wallet as your savings account. Mix and match to find a combination that provides both security and accessibility.