Bitcoin Wallets
What is a bitcoin wallet?
If you plan on buying, trading or using bitcoin, a wallet is something you’re going to want. In this guide we’ll discuss the types of Bitcoin wallets and why you may choose one over the other. As Bitcoin is a digital asset, the way it is used and stored differs from a traditional currency.
A Bitcoin wallet should be looked at as a way to access the bitcoin you own, as well as a way to send and receive it. Wallets can be on your mobile device, on your desktop, a physical hardware device or even a piece of paper.
A Bitcoin wallet has both a private key and a public bitcoin key. The private key is what you use to access your public key - or Bitcoin address - and interface with the Bitcoin network. This can simply be thought of as your PIN and is most commonly presented to the user as a 12-word passphrase. These words, or PIN, will mean you can access your bitcoin wallet from anywhere.
If you lose your wallet, you can use your passphrase to recover it. The public key or address can be used to receive bitcoin (BTC) and the private key is used to send bitcoin (BTC).
Mobile wallets
Pros
- Free and easy to set up
- Accessibility: Your bitcoin lives directly on your smartphone.
- Convenience: Using a bitcoin mobile wallet allows you to send and receive bitcoin by scanning a QR code.
Cons
- Mobile wallets are not secure enough to store large amounts of bitcoins.
Desktop wallets
Pros
- Free and easy to set up
- Accessibility: Your bitcoin lives directly on your computer or laptop.
- Convenience: Using a desktop wallet allows you to send and receive bitcoins by scanning a QR code.
Cons
- Desktop wallets are not secure enough to store large amounts of bitcoins.
Physical hardware wallets
Pros
- Security: Hardware wallets - also called cold storage - have been designed to protect your private keys from malware, virus and phishing. They are the most secure way to store your bitcoin.
- Portability: It can be connected to any Windows, Linux or Mac machine as an external device. You can use it anywhere in the world with any machine.
- Extensibility: It is compatible with different wallets: MultiBit HD, Mycelium and others.
Cons
- Price: They aren’t free, but they are a necessary expense if you’re holding larger amounts of bitcoin.
Paper wallets
Paper wallets are different from the other types of wallets and are often described as the most secure way to store your bitcoin. Unlike online wallets, this form of bitcoin storage is completely offline and physical, giving you full control.
A paper wallet is exactly how it sounds - a piece of paper that contains your private key and public address, usually printed in the form of a QR code.
Being a physical form of storage, it means you must take extra care to protect the paper. People with paper wallets often laminate the paper, or place it in a tamper-proof envelope and then within a safe to keep it completely safe and secure.
Pros
- Offline: Its offline nature means it’s protected from hackers and malware.
Cons
- Fragile: Paper wallets must be stored with thought and care.
Advice for keeping your Bitcoin safe
Create backups of your private keys. To protect against accidents such as a robbery, fire, or hard drive failure, it’s recommended to have a backup of your private keys kept off-site. Never give your private keys to anyone. Think of your private keys in the same way that you think of your pin code. When you share your private keys with someone, you are essentially depositing all of your funds into the hands of that person.
Hardware wallets: When generating your private keys, make sure you are in an offline and secure environment.
Mobile and desktop wallets: Keep your software up to date. The latest version of the wallet software will have greater security.
