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Everything You Should Know About Bitcoin Wallets

Published: 18/04/2018

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Cryptocurrencies keep gaining popularity, and more and more people want to get them. But when it comes to purchasing bitcoins, investors immediately start wondering where and how to store the tokens.

 

Why do you need Bitcoin wallets?

 

Bitcoin cannot be considered a fiat currency, as it does not have a physical form. You can neither touch them nor put them in a desk drawer. So you need something different to store them. And here Bitcoin wallets enter the scene.

 

Wallets come in different shapes and forms, with different levels of protection and usability. Still, all of them contain information about private keys that make Bitcoin address accessible. Each Bitcoin transaction requires two addresses - the origin and destination.

 

What types of wallets are available for users and how do they differ from each other?

 

Paper wallet

 

It is quite interesting and secured type of wallets. As its name implies, a paper wallet is made out of paper, although technically it could be made out of any material suitable for printing information. Each wallet contains private and public keys that serve as addresses used for cryptocurrency operations. The keys may be represented in the form of QR code to make a wallet more convenient. You just need to scan the code by using your the camera on your device, and the program will do the rest for you.

 

There are many free services that can create the printable wallet online. They generate the keys for you. Just make sure you clear your browser history after printing and delete the image of the wallet from your PC, tablet or phone.

 

The greatest thing about paper wallets is that they are absolutely offline. Hackers cannot reach information printed on them and steal your crypto coins. The absence of digital footprints left by BTC data guarantees that. As long as you keep your paper wallet safe, your money is secure.

 

To be totally safe, just try to follow these recommendations when creating your own paper wallet:

 

  • Generate keys privately.
  • Use a clean OS that runs from a DVD to leave no chance to spywares.
  • Select the service that does not require the network connection to generate the keys.
  • Make sure no one gets access to the printer you use creating the wallet.

 

Another issue is how to protect the paper sheet that contains information about your wallet. The importance of this paper cannot be underestimated. If you tear it or lose it, say goodbye to your crypto treasure. Thus, you have to secure this data and keep the wallet in a secret place.

 

Physical Bitcoin Wallet

 

This wallet is a bit unusual because it works as a bearer tool that allows storing certain amount of crypto coins inside and even trading them offline. The wallet holds information both on the public address and the private key. As long as the private key stays hidden, a user cannot carry out operations with funds stored in the physical bitcoin. To protect the key, a tamper-evident seal is used.

 

The first physical bitcoin wallet of this type was Bitbill, and it looked like a credit card. But soon the Casascius wallet appeared, and it was shaped like a round coin. The wallet was created in 2011 by Mike Caldwell, also known as Casascius (that’s where the wallet’s name comes from). The Casascius coin had a peelable seal in its body. As soon as the seal was broken, it signalized that the keys were disclosed.

 

Physical bitcoins used to be very convenient and simple and served as a perfect tool for offline trading. In addition, they are considered to be valuable collectibles.

 

However, it had a disadvantage - the legitimacy of these wallets was questionable. The production of these wallets was stopped in 2013, as they were put under the regulation of money transmitters.

 

Take into consideration, such wallets may be considered phony currency in the countries where Bitcoin is illegal.

 

Mobile wallets

 

This item is the best choice for the people who want to use their Bitcoins on the go. Such wallets work brilliantly well when you purchase something in stores that accept BTC. It works like an app and conducts transactions in a fast and reliable way.

 

Of course, this type of wallets has a significant disadvantage. It may face security problems, as hackers can find loopholes and breaches in the gadget OS and steal information, including the wallet address. Besides, you can lose your gadget – just like a real wallet.

 

Android users were the first to embrace mobile wallets, and there were some issues with iOS compatible wallets. AppStore put a long-term ban on such apps in February 2014, but now it is possible to use such wallets on Apple gadgets as well.

 

Here is a list of the applications, compatible with both iOS and Android. They have their peculiarities and specific sets of tools and features you can choose from.

 

  1. Airbitz

 

This app offers a zero-knowledge authentication for advanced protection and a single sign-in option for your convenience.

 

  1. Bitcoin Wallet

 

This app stands out for an open source software and a possibility to find Bitcoin merchants nearby.

 

  1. Copay

 

This app is also compatible with Windows Mobile and enables group vindication of the transactions apart from mobile wallet standard features.

 

  1. FreeWallet

 

FreeWallet is a popular multi-currency wallet that provides a cold storage feature to protect assets.

 

  1. Jaxx

 

It supports multiple forms of cryptocurrency and do not require verification. Another useful feature is the cold storage.

 

  1. Mycelium

 

Mycelium also can play a role of the cold wallet with the improved level of key protection.

 

 

Web wallets

 

These wallets keep all data about your Bitcoin account on a secured server. The main benefit here is a possibility to access your crypto funds through many devices as long as you have the Internet connection.

 

However, there are several cons. The service owners may get access to your keys and steal your funds. Besides, people who use wallets offered by exchanges often forget that some platforms are not reliable and may shut down unexpectedly. As a result, all the funds stored on the accounts will be vanished.

 

Still, it’s worth paying attention to some reliable and user-friendly web wallets:

 

  1. Coinbase

 

An all-in-one exchange with a possibility to create a BTC wallet.

 

  1. Xapo

 

A plain and simple software with an efficient toolkit aimed to improve the account protection.

 

  1. Blockchain

 

Users highly appreciate this web wallet.

 

  1. Circle

 

A web wallet with a basic set of features: storing, sending, receiving and buying

 

  1. Strongcoin

 

This service offers improved protection - it allows user to encrypt keys.

 

Desktop wallet

 

As the name suggests, all actions take place on the hard drive of your PC. Such a software is more protected and secured than the web or mobile wallets as there are no mediators involved. The process of stealing valuable information becomes more complicated. Still, desktop computers are web-connected, so they are vulnerable for hacker attacks and malwares.

 

Desktop wallets are convenient if you have to trade small amounts of crypto money from your PC.

 

Experts distinguish several subtypes of such wallets where more prominence is given to certain feature.

 

  1. Electrum

 

This wallet is compatible with the most popular OS. Its distinctive feature is the Replace-By-Fee option that allows to rebroadcast a low-fee transactions for a higher fee and makes the process of confirmation much briefer. Another useful option is the key encryption.

 

  1. Exodus

 

This is an intuitive and trustworthy wallet compatible with the major operating systems and calls for downloading of the whole blockchain.

 

  1. Bitcoin Core

 

This wallet can be used by Windows, Mac OS and Linux users. It requires the full Blockchain ledger for smooth operations and offers an independent transactions verification.

 

  1. Copay

 

You can take advantage of the two versions – mobile and desktop.

 

  1. Armory

 

Apart from Windows, Mac OS, and Linux, this wallet is compatible with Ubuntu and RaspberriPi. Data protection is also high here, it includes the key encryption and the cold storage option.

 

Hardware wallet

 

A hardware wallet is a perfect device for long-term storage, as it is highly protected from different hacker attacks and to date there is no evidence they have ever been hacked. The hardware wallet has unique security mechanisms and offers the most secure way of storing crypto money, as no one can transfer funds from it without your permission.  Thus, a hardware wallet received from the reliable producer is a perfect solution for cryptocurrency holders.

 

Here is the list of hardware wallets appreciated by users:

 

  1. Ledger Nano S

 

This medium price bracket device has a screen that ensures the correctness of entry data. Simultaneous pressing of two buttons is required to confirm the transaction. The wallet has a PIN code and is delivered with an anti-tampering seal.

 

  1. Ledger HW.1

 

The wallet has no screen, so a user has to connect the device to a computer and enter a PIN code to get access to crypto funds. (Jut make sure the PC you use is disconnected from the network). The wallet’s recovery seed consists of 20 words.

 

  1. Trezor

 

This wallet has a digital screen and two buttons to verify transactions. The security measures are boosted with a passphrase and 24-word seed.

 

  1. KeepKey

 

This wallet can be recovered or backed up and has an additional PIN code protection.

 

Bank wallets

 

Major US banks do not want to work with cryptocurrencies or use the Blockchain technology. Some of them even refuse to deal with funds gained through crypto transactions. Still, lack of transparency in the banking system persuades investors to shift to the innovative system.

 

The creation of the Bitcoin Crypto Bank was the solution many Bitcoin owners waited for a long time. It is a private company that claims to have a clean record and solid protection of Bitcoin deposits.  

 

Bitcoin wallet tips

 

Whatever cryptocurrency wallet you decide to pick, you should be as much careful as possible. Pay attention to these helpful pieces of advice and choose wisely!

 

  • Give preference to the wallets that have a cold storage option.
  • Keep in mind that wallets that do not require the Internet connection are more secure. So cold wallets are recommended if you plan to store large amounts of assets for a long time.
  • Use hot wallets for frequent cryptocurrency operations.
  • Constant vigilance! Do not open emails from unknown senders, and make sure that you use only trustworthy sources, companies and services.
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