- September 1, 2017
- Posted by: admin
- Categories: Bitcoin, Bitcoin Everything, Exchanges, Initial Coin Offerings, Investing, Markets, Trading
What Is A Bitcoin Wallet
Once you’ve decided to get into Bitcoin, the first step is a Bitcoin wallet. Without a wallet, you can’t spend, store nor receive bitcoins.
Technically, it’s not Bitcoins that you’ll be storing, it’s the private keys that give you access to them. And those private keys need to be secured to avoid getting hacked and drained from your Bitcoins.
Though it sounds complicated, a Bitcoin wallet is actually a website, app or hardware device that manages Bitcoin private keys.
The most important thing about a Bitcoin wallet is the security. You want your private keys and Bitcoins to be safe.
While many new traders and investors, especially when operating with small sums, keep their coins on the exchange, it’s strongly recommended to avoid that if at all possible.
Many people lost their money when btc-e exchange was closed down by the FBI. Including yours truly.
So, the mindset you should have is this: The safety of your Bitcoins is your own responsibility. If you do everything you can to protect your investment, the chances of getting hacked is very slim (especially with the hardware wallet).
Bitcoin transactions are not reversible.
Types Of Wallets
There are different types of wallets with different security levels. Each type have their own pros and cons. Which is the most suitable for you is, of course, yours to decide.
Hardware Wallet – A hardware wallet is a electronic device, a smartcard or small computer, built with the sole purpose of securing bitcoins (private keys) offline. Hardware wallets securely sign transactions in the offline environment.
Hardware wallet has to be connected to your phone/tablet or computer before bitcoins can be used.
It’s the most secure way of storaging your bitcoin. You don’t have to worry about losing or damaging your hardware wallet, as long as you’re smart and create a secret backup code. In that case you can always retrieve your bitcoins.
If you’re worried about hackers, then they would need to steal the hardware wallet itself. Which is not very likely scenario. Even then you can protect your wallet with a PIN.
And even if you connect your hardware wallet to a computer which is infected by some malware or virus, your bitcoins are still 100% protected.
Hardware wallets are a good choice if you emphasize security above anything else. The downside is that they are not free.
Online Wallets – Online Wallets are the most convinient to use. You protect it with your password, maybe 2-step authentication, but apart from that, it’s just like regular user log-in to any account you have online. Except, it’s more interesting to hackers. Online wallets have tacked the security question in different ways and there are many to choose from. However, as it’s online, it’s never 100% safe.
What Online Wallet essentially does is that it stores your private keys online, there they are encrypted with your password.
The advantage of such wallet is of course accessibility. You can log-in from any location and from any device. And you don’t have to download or do any other extra steps to get started.
Online Wallets are good for frequent payments in small amounts of bitcoin. For big amounts, we advise to use hardware wallets.
Desktop/Mobile Wallets – Basically, these are software wallets that are downloaded to your devices. For example, with desktop wallet you can perform bitcoin transaction from desktop. It might not be practical for some people, but they offer higher level of security than online wallets.
Mobile Wallets are more practical, but not as secure. It’s a good idea to only keep small amount of bitcoins in mobile wallets.
Paper Wallets – Paper wallet means that you print out your private keys and store them safely at your home (for example). The problem is that paper is easily destroyable – it can torn, fade or just get lost. There’s no recovery mechanism. If you lose your paper wallet, you lose your bitcoins forever.
On the other hand, it’s extremely safe from hackers, as it’s impossible to hack a paper wallet. You have full control of your bitcoin at all times.
Best wallets to try
The Ledger Nano S is the cheapest of the hardware wallets with a screen. Users can select between Ledger Nano or Ledger Nano S. Ledger Nano S can also store Ether, being the first of its kind. Private keys are generated offline in the secure smartcard environment. A random 24-word seed is generated upon setup and backed offline by writing it down on a piece of paper. In case of theft, damage or loss, the entire wallet can be recreated with the seed. A user selected PIN code is also assigned to the device to protect against physical theft or hacking.
The Ledger Nano may be used on any computer, or Android phones with Mycelium or GreenBits.
Ledger, one of the most well-known Bitcoin security companies, released the device in August 2016.
Price: Around 65USD
Trezor is the first hardware wallet launched to the market in August 2014. It offers secure bitcoin storage and the ability to spend bitcoins very much like you spend with a software (hot) wallet. Trezor is a small, about the same size as your thumb or a keychain. You can connect it to your computer via USB cable.
Trezor stores your private keys offline and signs transactions. Plus, it can be safely used on a malware infected computers. While Ledger Nano is a smartcard, Trezor is more like a very small computer. Similarly to Ledger Nano, Trezor generates a 24-word seed upon setup. In case you’re worried that someone manages to get their hands on your 24-word seed, you can add an additional password. It’s never too much security, especially when your investment is a large one. Though don’t forget your password as it can’t be recovered.
Trezor has a lot of support from Bitcoin community.
KeepKey was introduced in 2015 September. At the moment, it seems to be the most secure hardware wallet available thanks to the larger screen compared to Nano S and Trezor. When you purchase a hardware wallet it’s for one reason: To store private keys offline in a secure environment.
Keepkey protects against both physical and virtual theft. It can be used on every computer, including computers infected with malware or targeted by hackers. The seed is generated offline on the KeepKey display. Thanks to the offline screen the seed is never displayed on an internet-connected device.
The seed in default settings is 12 words, but you can choose to change it to 18 or 24 words. Plus, you can add a PIN code for extra layer of protection.
Wallet can be recovered with a backup seed if you lose or damage your KeepKey wallet. So make sure you have multiple backups of your seed. Recovery is done with Chrome extension KeepKey Launcher.
KeepKey has a premium feel to it. It’s made of aluminium and is heavier compared to, for example, Trezor (plastic).
You can store Litecoin, DASH and other altcoins on KeepKey. However, it’s up to software wallet developers to integrate support, as the device itself is compatible with any altcoin.
GreenAddress in our opinion is currently one of the best online wallets. It’s a multi-signature Bitcoin wallet. You can use it on the web, desktop, Android and iOS. It’s also compatible with some hardware wallets like Ledger Nano and Trezor.
As highlighted before, web wallets can be more prone to cyber attacks. Hence, it’s never 100% safe. Fortunately, GreenAddress takes this very seriously.
With GreenAddress, multi-signature means that if you want to move your coins, then you’ll need to confirm it manually. This is great for security. And they won’t make you choose between convinience and security. GreenAddress has both.
Two signatures are required to validate any transaction. One from GreenAddress, one from you. If the transaction complies with the limits you have enabled and you provide two-factor authentication, only then GreenAddress signs your transaction.
As a bitcoin holder, you probably like to check your bitcoin wallets many times a day to be sure your bitcoins are still there. This kind of login-logout can be unsafe, especially if done over unsecured networks. This is one area that GreenAddress has tackled very well. They have a watch-only mode, which helps users to check balances without compromising safety.
How can you get GreenAddress online wallet? You’ll need to download GreenAddress app. You can get it from the App Store or from Google Play. Once you have the app downloaded, open it and then click “Create New Wallet”. It’s hard to miss.
They have very easy to understand “how-to” inside the app for all the next steps. It’s a 3-step process to get your account setup.
Blockchain.info is the most popular digital wallet. Their main selling point is ease of use and cross-platform capability.
Yet, as often happens with new things, errors do happen. Blockchain.info has had their share of failures in the past that have cost their users quite a bit of money. We do think these failures are now in the past, but it’s not easy to shake off the uncertainty. Plus, you can hear from here and there problems with their support.
For everyday transactions with small amounts, we do think blockchain.info is a decent choice to go with.
But if you’re operating with bigger amounts, get yourself a hardware wallet instead.
Aside from web wallet, Blockchain is also available on desktop and mobile app.
Mycelium is the most popular Bitcoin wallet on Android. It’s the favorite among experienced Bitcoin users. Like GreenAddress, they have many advanced features – hierarchical deterministic wallets, private key deletion, watch only accounts, support for hardware wallets (Ledger, Trezor), cold storage spending, Tor.
Backing up your wallet is simple. They have one of the best setup and backup instructions, so for a new user, it’s definately a recommended option.
Go to Google Play and download Mycelium Wallet. Open the app. Although it’s ready for use from the start, we strongly advise to secure it. On the top right corner you can go to settings and set a PIN code (in case of theft). After you’ve set your PIN, check for a backup button inside settings.
You’ll need to enter your PIN to access the recovery phrase. The Wallet will show you 12 words, one by one.
Write those words down on a paper. Screenshot is not possible. Never ever write those 12 words on an e-mail (!!), as everyone with those 12 words can access your account.
To receive bitcoins, go to Balance and select Receive. You can share your bitcoin address manually or by letting the sender scan your QR code.
Electrum is one of the most popular desktop wallets on the market. You can use it on Mac, Linux, and Windows. It has been on a market for a long time, being created as early as 2011. Electrum is fast, easy to use and considered a safe wallet. Of course, the more time goes by, these things become a standard for any wallet that’s on a market.
Electrum offers multisig wallets, integration with hardware wallets (Trezor, Ledger Nano and KeepKey), and connecting through Tor. Electrum can be used as a cold storage, if you have an extra computer that can be used offline. This creates extra layer of safety.
Electrum has our highest ratings – for both beginners and advanced users.
There are many more Bitcoin wallets on the market and we keep adding them to this article. There are always new and better standards set on the market, so we’re positive that we see more improvements in usability and safety in the near future. Word of caution though – it makes sense to choose proven wallets that’ve been in the market for some time. You never know which new wallet can be 100% trusted and does not have technical problems. Technical problems can happen to anyone, but more so with new products.