Bitcoin Wallets: Useful Details
Day by day, cryptoassets get more popular and desirable, and people search for proper ways to buy and keep them safe. Let’s take Bitcoin as an example to figure out what is the best method of storing digital coins.
What is a Crypto Wallet?
Since bitcoin is digital, it has no physical form and requires a special place where it can be kept. A crypto wallet is a software or hardware that helps manage your crypto funds.
Wallets are different and arranged according to their performance, comfort, security level, and many other features. But what is common for all of them is data stored inside. Each bitcoin wallet contains data about private and public keys.
Given the fact that we talk about digital currencies, the phrase “paper wallet” may seem a bit unusual. A paper wallet is nothing but a sheet of paper that contains data. In fact, paper wallets can be made of any material — the more durable, the better.
Both private and public keys printed on a paper wallet are also presented in different forms: QR codes, base-58 or plain bits. All you need is to input this data into a special software to perform cryptocurrecy operations. Some services allow printing key pairs for free but the only reliable way to create them is to generate by yourself.
The key advantage of a paper wallet is that it is completely offline. This means that nobody can hack it or use its software vulnerabilities. Just try to keep it in a secret place so that anyone could get access to it.
To ensure the safety of your paper wallet, follow these recommendations:
- Create keys in private.
- Make sure your OS has no backdoors, malware, etc.
- Use offline software.
- Leave no traces and records about wallet keys.
Physical Coin Wallet
This type of wallets is also uncommon for the digital world. In its basic form, this instrument allows keeping coins inside and trade them offline. Both keys are kept in the wallet, and their safety is supported by a tamper-evident seal.
There are several examples of physical coin wallets — Bitbill and Casascius. Physical coin wallets are handy and can be used both as a storage and a souvenir. Unfortunately, they have some unresolved legitimacy issues. Their production was halted in 2013 by regulators, and today some countries consider these devices illegal.
The most convenient option for storing BTC is a mobile wallet. Mobile wallets are programs that keep information about your cryptoassets in any kind of mobile devices. This software allows users to perform fast crypto transactions from any place in the world.
Unfortunately, mobile wallets are less secure, which is a sort of payback for using such a handy tool. Some exploits in a software code or simple errors may lead to a huge loss of funds.
Initially, mobile wallets were available only on Android. AppStore banned wallet applications in February 2014, and iOS users could not use this kind of crypto storages for some time. Today, these programs can be used on both OS.
Here are several examples of bitcoin wallets compatible with Android and iOS:
This software proposes a zero-knowledge authentication for higher security and a convenient single sign-in feature.
This is an open-code software that allows automatically searching for BTC sellers nearby.
A secure HD-multisignature wallet available for both desktop and mobile devices.
FreeWallet is a famous cross-currency wallet with a cold storage option.
Jaxx is a mobile app that does not require registration and supports different cryptocurrencies. A cold storage option is also available here.
Mycelium is an iOS and Android wallet app that can play a role of a cold storage with the advanced level of key protection.
This type of wallets store all user data about bitcoins on servers. There is no need to install any software to manage your funds. All you need is the Internet connection.
Disadvantages also exist. For example, the service owners control information about your keys (and thus your funds). There is a risk to run into scammers, so all your assets may be stolen.
The most reliable and convenient services are Coinbase, Xapo, Blockchain, Circle, Strongcoin, etc.
The next group of crypto wallets consists of offline software that is run on a PC. It ensures security as there is no need to trust intermediates. Yet, desktop wallets are subjected to standard types of hacking attacks. These programs may be useful if you constantly use your PC to perform crypto trading operations.
This is a software compatible with several operating systems. Its Replace-By-Fee option gives an opportunity to rebroadcast low-fee transactions for a higher fee reducing the process of confirmation. A key-encryption option is proposed as well.
Exodus is a handy wallet program that works with the majority of OS and requires a full blockchain download.
This is a bitcoin wallet available in Windows, Mac OS and Linux environments. It downloads full blockchain and proposes an independent verification of transactions.
This wallet is available on Windows, Mac OS, Linux, Ubuntu and RaspberriPi. It has a high-level data protection, cold storage options, and several encryption features.
A hardware wallet is the best option for long-term cryptocurrency storage. Besides, hardwallets can guarantee a high level of security and reliability. It is a physical electronic device that allows keeping cryptoassets protected by multiple lines of defense, such as passwords, PIN-codes, seed-phrases, etc.
The most well-known examples of hardware wallets are Ledger Nano S, Trezor, KeepKey.
Tips For Newcomers
No matter what kind of bitcoin wallets you pick, you have to take care of your funds yourself. There is no storage that can guarantee a 100% security. Each of crypto storages mentioned above has its own vulnerabilities. However, you can minimize the risk of losing your crypto money by following these several recommendations:
- Cold storages are better. Try to use wallets that can keep cryptocoins in an offline mode, as the Internet connection makes wallets less secure.
- Use hot wallets only for frequent operations on a daily basis.
- Do not share data about your wallet with anyone.
- Keep your seed-phrase in a secret place, as it is the only way to restore access to your crypto wallet. Losing a seed-phrase means losing all your coins.
- Never open emails from an unknown person, work only with trustworthy websites and services.