With ever growing popularity of cryptocurrencies, buying and selling Bitcoin coin has seen a tremendous increase in recent years. Once you bought Bitcoin, you will need a wallet to store and keep them safe. Choosing one can be quite confusing especially if you’re a beginner and new to the world cryptocurrencies. This guide was written to help you find the best Bitcoin wallet to fit your needs and give you some further guidance on what to consider before choosing a wallet to store your Bitcoin.
Compare the Best Bitcoin Wallets
In this guide, you’ll see a list of different types and categories of Bitcoin wallets. You’ll learn more about these wallets so you can make a more informed decision on which you’ll choose. We have also taken the liberty of shortlisting a few that we feel are worth considering due to their accessibility and functionality.
Understanding Bitcoin Wallets
A Bitcoin wallet is just like your physical wallet where you store your cash. It stores your private keys used to access public Bitcoin addresses and your Bitcoin transaction signatures. Overall, your wallet is a software program that can be used to send & receive Bitcoin, as well as store and monitor your balances.
You need a wallet address to use your Bitcoin, a wallet address is an alphanumeric mix. When you create your wallet, an algorithm assigns you a private key, and a public key that ensures that this wallet can only be accessed by one individual. The private key could be thought of as a pin number. It determines who has access and full rights to a wallet. Public keys are needed for funds to be sent to your Bitcoin wallet. They can be thought of as your ‘account number’
To send Bitcoin between private wallets, you need the wallet address of the receiver or their QR Code. You can transfer Bitcoins to them easily through peer-to-peer networks (P2P). This process decentralises the Bitcoin transaction. Once the Bitcoin is sent, it is held temporarily by the system and once receipt of cash is confirmed on the platform, the balance updates instantly.
You can purchase and sell Bitcoin on cryptocurrency exchanges and pay with you credit/debit card or PayPal. Once you made your purchase, you simply enter your address and the Bitcoin will be sent to your wallet. After depositing cash using a credit card or any other method available on your trading platform, you can place a buy order and wait for the trading platform to handle the rest. You can also sell using a similar method, with a sell order.
Advantages & Disadvantages of Using a Bitcoin Wallet
How to Choose a Bitcoin Wallet
Here is a list of features you need to be on the lookout for when choosing a Bitcoin wallet in 2022 :
- Security: Security is the most important factor to consider when choosing a Bitcoin wallet in 2022. You should ask yourself the question “Is my money safe?”. Confirm that your wallet's website is HTTPS, ensuring you don’t mistake it for HTTP. Your choice of wallet must offer strong and secure login options. Two-factor authentication (2FA) is another must have for the option you choose.
- Wallet backups: Backups have become a very important part of digital service. Having a backup service provided is an important feature and should be secure, readily available, and easy to use.
- Reputation: This indicates how credible a wallet provider is. You should do some research and ask questions on forums such as Reddit, this would help you avoid choosing a wallet provider already known to be problematic.
- Transparency: A good wallet provider is open about their operation. This includes using an open-source code so you can determine if your wallet is secure or not. Vulnerabilities can be easily detected through peer viewing and the wallet open-source codes must be kept up to date.
- Bitcoin full ownership: Ensure that your wallet gives access to your private key, having a private key means you have full access and control over your Bitcoin. Your private key is also needed to back up your wallet outside your wallet service provider.
- Anonymity: if being anonymous is a high priority for you, then you need to check the information required for opening a Bitcoin wallet. Check if the platform has a strict verification and KYC policy, as these processes remove the ability to remain anonymous.
- Hierarchical Deterministic (HD): Confirm if the wallet reuses same address after transactions or assigns new addresses. Having an HD wallet that provides its user with new address for every transaction is an extra layer of user privacy.
- User experience: How does the wallet platform look? Is it easy to use and navigate? Check if they offer a mobile app so you can access your wallet on the go. Depending on how advanced a user you are, you can go for something that suits you.
Wallets are generally divided into two categories: Hot and cold. Hot wallets are connected to the internet. Cold wallets are purpose built devices that are intended to hold your keys and your investment securely offline. All types of Bitcoin wallet are generally categorised under one of these two.
Types of Bitcoin wallets
1. Web: Web wallets require online access to use your wallet. For web wallets, you don’t need to download any application; all you need is a web browser to access your wallet. This method can be unsafe if you are using an unregulated exchange, your private key can be accessed by a third party like the organization who is your wallet provider. The wallets are stored on a server that is always online.
2. Mobile: This is another form of hot wallet. Users who run Bitcoin transactions daily would find this is a good option for them. A mobile wallet is a smartphone application that holds access to your private key. This way, you can perform your day-to-day transactions directly through your phone. Apps stored on your phone can even make use NFC and QR codes for payment, this makes them relatively easy. The downside to this wallet type is that they are prone to cyber-attacks. Another danger is that people can gain access to your private key if they have full access to your phone or tablet.
3. Desktop: Desktop wallets, just like mobile wallets, are software wallets downloaded and installed directly onto your computer. They store your private key on your hard disk. This way it is safer than both the web and mobile type because it benefits from antivirus software installed to the PC. Desktop wallets are a "hot wallet", meaning they are less secure since because they connect to the internet. If you do small daily trades of Bitcoin, then this is the best method to use.
4. Paper wallet: This is a piece of paper with your private key and wallet address printed on it. Paper wallets are technically cold wallets, although not very secure, being vulnerable to being lost, stolen or damaged. To use this method for transfer and receiving Bitcoin, you simply scan the QR codes. This method is majorly flawed, however, and not encouraged.
5. Hardware: Hardware wallet stores your private keys on a physical device that interacts with a computer through a USB port. These devices don’t transfer funds in plain text and are immune to computer viruses. It is the safest method to store your Bitcoin. However, they aren’t free and require purchase. Some have screens that add an extra layer of security to your crypto investment. Hardware wallets are cold wallets but the downside to this type of wallet is that they are i,nconvenient for daily traders since they are less accessible.
3 Steps to Using a Bitcoin Wallet
Step 1: Choose a Bitcoin Wallet
Use the information above to decide what type of Bitcoin wallet you’d need. For top security and, if you hodl for long-term investments, then you should use hardware wallets. However, if you are a user who performs daily transactions and Bitcoin is your preferred payment method, you should use a mobile wallet. Though they are not as secure as hardware wallets, they are the most convenientchoice for daily transactions.
Step 2: Setting up a Bitcoin Wallet
Once you’ve chosen your wallet, you need to set it up or sign up to a service. For hot wallets, you need to sign up online with a wallet provider but if you’re going to use cold wallets, then you need to set up this device for use. Ensure you include security locks and backups for future purposes.
Step 3: Start using a Bitcoin Wallet
To start using your Bitcoin wallet, simply send your QR code or wallet address to a friend. You can also buy Bitcoin from wallet providers using your credit card. Trading platforms can also be another method of receiving Bitcoin. Once your private key and wallet address is ready, you can start using your Bitcoin wallet for transactions.
Generally, the choice of wallet depends on how frequently you transact, the amount you transact, and how much security you require. Hot or cold wallets both have their pros and cons so you must be sure your wallet choice is safe and easy to use. Finally, be sure to do a backup to prevent losing access to your funds in the event that you lose your private key.
For further information, visit our cryptocurrency wallet reviews to find out more.
Frequently Asked Questions
Yes, Bitcoins don’t exist physically and your private key is what you use to access your address and transactions.
You can sign up online for hot wallets (web and mobile), or you can buy and setup a hardware wallet too.
You can do this with the private key assigned to you when creating your wallet.
No, address can change depending on your wallet providers feature. Hierarchical deterministic wallets always change addresses to keep users anonymous.
You need to share only your wallet address for a transaction, never share your private key
It’s best to use a wallet provider that gives you a private key, this is more secure since whoever has a private key completely controls a wallet.
No, wallet address can change if they are HD wallets and you would be assigned new address every time you which to make a transaction. You should store your private key in a secure location and have backups.
No, you can’t, your Bitcoin is lost forever once you lose your private key. This is why a Backup is very important to avoid such loss.