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Before you invest in Bitcoin, you need to have a place to store it.
Unlike traditional currencies, Bitcoin requires a cryptocurrency-specific wallet.
Today, there are plenty of wallet options to choose from. And while most of them are fairly easy to get started with, selecting and setting up a wallet isn’t a process to rush through.
In fact, choosing a secure wallet is one of the most important parts of learning how to use Bitcoin. Just like with any other investment, you want to be confident that your money is safe — and the wallet you use is the largest factor in whether that’s the case.
That’s why on this page, you can find everything you need to know about Bitcoin wallets, what your options are, and how to choose the one that’s best for you.
You’ll often hear Bitcoin wallets described as a place for storing Bitcoin. And while this is the simplest explanation, it’s not technically accurate.
Unlike a physical wallet that holds cash and cards, a Bitcoin wallet stores a set of private keys used to access Bitcoin addresses.
These keys are what enable users to send and receive Bitcoins, and retain ownership of a Bitcoin balance.
You can think of them as essentially the password to unlocking your account — and your wallet is what keeps them safe from being hacked or stolen.
In this sense, the most important function of a Bitcoin wallet is keeping your funds safe. After all, we’ve all heard those sad stories of unfortunate people losing their Bitcoins.
From online wallet hacks to desktop trojans watching for passphrases, the world of cryptocurrency storage is only in its early stages.
A realistic strategy is always needed when securing your digital assets – both for long-term storage and for everyday use.
That’s why choosing a good wallet is one of the most important parts of learning how to use Bitcoin. Using a safe storage solution is still not an easy task.
In fact, the most convenient wallet systems are often the most unsafe. Fortunately, there are many other (safer) options for holding your Bitcoins.
Before we look at different types of wallets in more depth, you need to understand the difference between so-called “hot” and “cold” wallets.
The terms “hot” and “cold” are used to describe the online connectivity of a Bitcoin wallet, and by extension, its risk factor.
The difference between the two is simple.
A hot wallet is constantly connected to the internet with the private keys loaded ready for use. For this reason, a hot wallet is riskier because a hacker can theoretically access the private keys if they find a vulnerability.
As a result, you’ll sometimes hear the term “online wallet” used interchangeably with “hot wallet.”
Some people opt for this type of wallet because they make it easy to complete transactions quickly and on the go.
A cold wallet, on the other hand, is not connected to the internet and the private keys are offline.
You’ll sometimes hear people use the term “offline wallet” to describe this type. Cold wallets are typically considered safer than their online counterparts because they make it more difficult for potential hackers to access keys.
Some cold wallet systems need to connect to the internet for transactions to be made. Others allow transactions to be signed offline, then broadcast to the Bitcoin network without connecting the private keys.
Although slightly less common, you may come across the term “warm wallet” when researching your options. This refers to cold wallet systems that must connect to the internet to make transactions.
A warm wallet, then, can be defined as a mix between a cold wallet and a hot wallet. They’re not considered as safe as pure “cold” wallet systems, but still offer some of the conveniences of a “hot” wallet.
Within the “hot” and “cold” categories, there are a few different types of wallets you can use to store your keys and manage your Bitcoin.
Hardware wallets are very sophisticated semi-cold storage systems.
As the name implies, this system involves using a piece of hardware to store the private keys to your Bitcoins.
Every time you want to send coins, you’ll need to connect your hardware wallet to a PC. Then, you can take it offline once the transaction is complete.
Keep in mind that unlike most other types of wallets, which are typically free, you’ll need to purchase the hardware you use for your Bitcoins.
But given that this is widely considered one of the safest ways to store cryptocurrency, you may find that the investment is more than worth it.
If you’re interested in purchasing a hardware wallet, the following are a few of the most popular options.
Ledger Nano is one of the most popular hardware wallets on the market today, and supports Bitcoin, Ethereum, and Altcoins.
It offers robust safety features and ensures that sensitive operations are isolated inside the wallet, locked by a PIN code.
This wallet connects to any computer via USB, and also has a basic screen to make confirmation transactions and checking your balance easy.
Plus, it’s one of the more affordable hardware options available — making it an all-around excellent choice if you’re looking to switch to this type of wallet.
TREZOR was one of the first hardware wallets available, and it’s still one of the most trusted and widely-used brands today.
This wallet uses a minimalistic design to avoid opportunities for hacking, and is tamper-proof, water-resistant, and durable. It also features a simple screen for confirming transactions.
If you’re new to hardware wallets, getting started with TREZOR is easy. You can set up your private, registration-free wallet within minutes using the company’s Bridge software.
And if you ever lose your wallet, you can use TREZOR’s verification process to quickly regain access to your keys, account, and Bitcoin.
If you’re looking for a secure option, you can’t go wrong with either of these choices.
Desktop wallets are apps installed on a desktop computer or laptop.
Many people store significant proportions of their Bitcoins in desktop wallets, as they’re much safer than web or mobile options.
If you’re comfortable with ensuring your computer’s security, then this may be a relatively secure option for you.
A desktop wallet could also be a great option for keeping a certain percentage of your portfolio.
So if you’re interested in exploring desktop options, these are a few to consider:
While desktop wallets still may not be quite as secure as their hardware counterparts, they can still be a solid choice. As long as you do your research and take steps to keep your coins secure, there are plenty of great options available.
Web wallets are typically hosted on websites or online exchanges that allow storage.
This is the least secure option, as it usually involves leaving the management of your private keys to a web server.
Web servers are more prone to hacking than private computers, and storing your keys on one also requires trusting the online wallet operators.
Still, they’re a convenient way to store small amounts of Bitcoin online for quick and easy payments.
To be clear, keeping large quantities of Bitcoin in a web wallet is not a good idea. But if you want to hold some of your coins in a more easily-accessible space, having a web wallet in addition to your primary wallet could be a decent option.
Today, all of the major Bitcoin sites offer free web wallets. It’s important to note, though, that these are custodial wallets, meaning that the exchange operators own and manage all private keys on your behalf.
While a web-based wallet should not be used as your primary form of storage, or for large amounts of Bitcoin, keeping some funds in one of these options could be a convenient way to make your money more easily accessible.
A mobile or smartphone wallet is, as the name suggests, a Bitcoin wallet on your smartphone.
The biggest advantage of mobile wallets is that they make it easy to send and receive payments quickly with QR codes.
That being said, in terms of security, mobile wallets are as lacking in security as web-based wallets.
This is because most mobile apps automatically update. If a hacker were able to gain access to the developer’s iTunes or Google Play account, they could potentially infect and steal millions of users’ wallets through an automatic update.
Still, this type of wallet is convenient for having small amounts ready to pay.
The top mobile wallets for iOS and Android are:
Again, these wallets likely aren’t the best choice for storing large amounts of Bitcoin — but if you’re looking to send and receive Bitcoin through in-person transactions, they’re a great way to simplify the process.
Though a paper wallet may sound like the least advanced option of all, many consider it to be the most secure cold-storage solution.
With a paper wallet, you only have to trust the wallet-creating software and the physical location that it will be stored in. And if you choose to store your wallet in a safe or bank, you have very little to worry about.
As with all cold storage solutions, however, it’s not exactly convenient, since you’ll need to create a new paper wallet every time you want to send Bitcoins somewhere.
That being said, if you’re planning to hold on to your cryptocurrency for a long time without spending it, a paper wallet could be a great option for you.
Here are the most trustworthy paper wallet systems:
If you’re unsure of how to use these tools, Coindesk offers a helpful resource for creating paper wallets.
Even if you don’t opt for a paper wallet, it’s still a good idea to record details that will help you access your Bitcoin wallet in physical format.
If you’re using a desktop wallet, for example, consider writing your recovery phrase down — so that if you ever forget it, you won’t risk losing your funds entirely.
Most Bitcoin wallets simply need one private key signature to make a transaction.
Multi-signature wallets, on the other hand, require multiple private key signatures to make a transaction.
With this kind of wallet, every time you want to make a transaction, you first need to authorize it yourself, then have another trusted person authorize that same transaction.
Neither you nor the other person can make a transaction on your own, since both parties require the other’s consent to complete one.
This allows for some pretty advanced features, making it a very safe storage solution. It’s especially popular among business owners who utilize Bitcoin.
Multi-signature capabilities are available in certain web, smartphone, desktop, and hardware wallets.
These are the best wallets for multi-sig capabilities:
Now that we’ve covered the different types of wallets in-depth, you can use this simple table to compare the differences:
|Hardware||very safe||average||average||$90 – $400 USD|
|Paper||very safe||difficult||not convenient||usually free|
The type of wallet you decide to use depends entirely on how you intend on using your Bitcoins.
If your goal is to spend your Bitcoins often, you’ll probably want a hot wallet. This is similar to keeping cash in your physical wallet.
It might get lost, but you’re planning on spending it anyway — and you don’t keep your entire life savings there.
If your goal is short-term investment (that is, trading your Bitcoins within the next year or so), you’ll want a warm or cold wallet. Consider a hardware or desktop wallet, where your Bitcoins will be more secure than they would be on an exchange.
Finally, if your goal is long-term investment, a cold wallet is the best choice. If you plan on keeping your Bitcoin investment for years (or if you have a large amount), it’s essential to take extra precautions.
Encoding your secret key on a piece of paper and storing it in a bank safety deposit box is the safest move if you’re planning on keeping your investment secure for years to come.
Today, there are plenty of options available for storing Bitcoin. And while each of these options presents its own unique set of advantages, it’s important to consider security when making your decision.
If you’re interested in making purchases at one of the many retailers that now accept Bitcoins in store, you might consider using a “hot” wallet like a mobile app.
But for long-term investments, it’s essential to choose a solution with minimal risk.
And although the high-security options are slightly less convenient than their online counterparts, the peace of mind of keeping your Bitcoin secure is well-worth it for most investors.