2nd eCoin4dummies Guide: Bitcoin Wallet
While you can trade Bitcoin on an exchange platform without having a wallet, the only safe way to hold Bitcoin is on your personal wallet. So before you start receiving or sending Bitcoin you have to buy or download your own personal Bitcoin Wallet.
In this Guide, You will learn about the Following:
As I mentioned in my other article “What is Bitcoin?”, there are 4 types of Bitcoin wallets: Cold Storage Wallet, Web Wallet, Software Wallet, and Paper Wallet. Each of these wallets has different advantages and disadvantages. In the table below you can find a basic but important comparison between 4 of them.
|Type of Wallets||Security Rank||Ease of use||Losability|
|Cold Storage Wallet||Best||Third||Best|
- Cold Storage – its biggest strength is the security and “losability”, meaning it is harder to lose than other wallets.
- Web Wallet is the least secured one since you don't “hold” your money. Think about it this way: you are leaving your money with a different company and they are not a bank.
- Software Wallet is not the best at any of the categories, but holding this type of wallet allows you to really hold your own money with you, which in my opinion is better.
- Paper Wallet holds the last place in 2 categories but it is secure. The low score in “losability” is due to the fact that it is a physical paper document.
Each of those Wallets has multiple versions. Different companies make their own versions of them. In the upcoming articles, I will review a few of each of those Bitcoin Wallets. I advise you to make research if you are planning to store big amounts of Bitcoin.
Crpyto-Compare did a research about all the debit cards available to use with Bitcoin.
Hot Wallets – Online Bitcoin Wallets
Online Bitcoin Wallet or “Hot Wallet” is a wallet that is available on a device and connected to the internet, like PC, Tablet and Mobile.
Since your wallet address in created online, it can't be considered as 100% secure. while it is not considered secure enough to hold a “big” amount of money, it is still the easiest way to start holding Bitcoins. As long as your Bitcoin holdings are not too high, no one might attempt to steal. But you should be keeping all your recovery phrases and connect the wallet to at least 2 different devices.
If you want to learn more about other types of wallets like Cold Storage Wallets Click here, or here for Paper Wallets, or here for an extended article about Bitcoin Wallets.
so let's drill down to 3 different online Bitcoin wallets, each one is putting its focus on different aspects.
Exodus – The prettiest wallet of them all.
If you are just starting up with Bitcoin, Exodus will give you an easy way to learn how to handle your new Bitcoins.
It's supporting a few of the altcoins like Ethereum, Litecoin, Dash and more are being added. On the downside, this online Bitcoin wallet works only with desktop and doesn't support mobile. Exodus is considered less secure than other wallets since the software was developed by a company and it is not open source like other wallets.
Bitcoin Core – A full Bitcoin node wallet for hardcore Bitcoiners
While other normal wallets are SPV wallets or “Lite wallets”, this Bitcoin Core wallet is a Heavy cannon. On Lite wallets, other computers connected to the network validate the transaction. Put it in another way, your computer doesn't hold a full copy of the ledger, on Bitcoin Core, it does.
It is a strong wallet, for advanced users, but for most of us, there is no use in downloading the complete ledger (which is more than 145GB). It takes a lot of time, but it is the REAL Bitcoin wallet. Bitcoin Core is available only on desktops, but it is still secure than most wallets because of the community-driven development that leads to the creation of this wallet.
Blockchain – The Practical Wallet
Blockchain wallet is one of the most popular wallets out there. It is some kind of a hybrid wallet, while it does store your coins online the company doesn't have any access to your private keys. You can connect to this wallet from both desktop and mobile app.
There are many other hot wallets out there. Some focus more on security like Armory or Copay, and some focus on other aspects like visibility or simply speed. If you are going for higher sums of money investment you should consider going with a cold storage wallet. In the meantime, you can use any of those wallets. Nevertheless, remember to use all of their security options to keep your money as secure as it can be.
What Is Bitcoin Paper Wallet?
A paper wallet is an offline document. It has the relevant data needed to generate different Bitcoin private keys. A Bitcoin paper wallet is considered the safest way to store your Bitcoins as it is free of malware and cyber attacks. The paper wallet entails “printing” the Bitcoins. However, it’s important to understand that the Bitcoins are not printed out like regular currencies. Instead, the Bitcoin wallet's information is the one that is printed out.
If you want to learn more about other types of wallets like Hot Wallets click here, or here for Cold Storage Wallet or here for an extended article about Bitcoin Wallets.
The paper wallet has several advantages:
- safekeeping of private keys
- devoid of malware and cyber attacks
- not dependent on website’s security
On the other hand, the owner is entirely responsible for securing the physical paper. If you have lost the Bitcoin paper wallet, you lack any alternative for accessing your Bitcoins. You will lose them forever.
How to Create A Bitcoin Paper Wallet
You can create a paper wallet with:
- Bitcoin Address Utility
Some companies also provide their customers with “cold storage” – physically storing the private keys in a safer location like a vault. These companies usually have insurance against theft, although the financial services industry does not regulate them.
As an example, we will use BitAddress.org to explain how you can create Bitcoin paper wallet:
- Visit BitAddress.org
- The site will ask you to be certain. This is done by moving your cursor or by typing on the keyboard.
- After completing the above until 100% has displayed, you will get your public and private keys together with the relevant QR codes for easy access
- Locate the “Paper wallet” tab and click on it
- Input the total number of wallets you want to generate
- Click on the “Hide art” if you wouldn’t like to retain the Bitcoin artwork
- Hit the “Generate” button to produce your wallet
- After the wallet generation completed, click “Download.”
- Follow the relevant download steps as guided
Securing your Bitcoin Paper Wallet
As the risk involved in storing such big amount of money is high, it’s important to take safety precautions. These include:
- Generating the paper wallet in privacy
- Protecting the paper wallet from any kind of harm (wetting, tearing, burning, etc.)
- Keeping the paper wallet in a vault
In conclusion, paper wallets are one of the safest ways to store your precious Bitcoins as hackers can have no access. In spite of that, don’t forget to ensure the physical security of the paper wallet.
Hardware Wallet – Cold Storage Wallet
Using a hardware wallet is another way to store your private keys – they are kept safe on a hardware device. Those devices are referred to as Cold Storage Wallet meaning that they appear offline.
If you want to learn more about other types of wallets like Hot Wallets click here, or here for Paper Wallets, or here for an extended article about Bitcoin Wallets.
Comparing to other wallets, the hardware one provides major advantages:
- Private keys are stored securely on the device and can't be accessed from the web
- Not exposed to software viruses – even when connected to an infected computer
- Unlike the paper wallet, this one has buttons that allow you to confirm actions, which means no actions are being made on the computer you are using.
Hardware wallets are much more secure than the other types of wallet but they come with a cost – you can spend around 99$ on your new device. Another downside – like any other hardware, it can break down. Currently, cold storage wallets are considered as the best way to keep your Bitcoins.
Hardware Wallets on the Market
TREZOR – Security Security
With a price of 99$, the device generates the private keys. This information never leaves the hardware, making it malware secure. TREZOR can store an unlimited number of keys. This wallet generates a recovery seed, which recovers your wallet information (bitcoin balance, transaction paths and private keys) in case of theft or just losing the device. You can have your recovered information transferred on a new wallet.
TREZOR’s PIN has a special security feature while entering it – keyloggers cannot record it. You can also set an additional encryption passphrase for more security.
KeepKey – Security Security Security
Priced at 99$, this wallet appears as a USB device that stores your coins. All transaction should be approved via the device – it has a bigger screen than others and it offers better security features with it.
KeepKey offers an outstanding recovery feature that utilizes a rotating cipher to restore your keys. Having this said, it’s not needed to store private keys on the device: the recovery process is so secure that this hardware wallet can be used as a transaction device for paper wallets.
Nano S by Ledger – Cheaper, Smaller and..same?
Pricing at 65$, this hardware wallet is a USB device with a screen to navigate you and a single button on the side for confirmation of actions, yes just like all the others. The perk about Nano S is that it allows safe execution of many open source applications in complete isolation. Nano S is cheaper than most wallets and the security difference is minimal.
Overall there is no reason to buy a more expensive wallet then this one, it should supply all your needs. You can purchase the Nano S directly from the company here.
As a bonus, I found this video of a guy testing how durable are the hardware wallets I just reviewed. (none of them break actually)