One of the most important choices you will make in regards to Bitcoin and cryptocurrency in general is what wallet you will use.
No matter the case, the first step is always to figure out what type of Bitcoin wallet you actually need. Then, you want to consider the best ones and their features. Only after that you can choose the best wallet for you.
Bitcoin wallets do differ a lot based on convenience, security, privacy level, coin support, user interface, fees, customer support, anonymity and built-in services.
Cold Or Hot?
The main distinction between wallets is cold or hot. A cold wallet basically means you have offline storage. Hot wallets are almost always connected to the internet.
Online wallets stand out as good choices if you use cryptocurrency on a daily basis. However, security is lower. Offline wallets are not that convenient if you use crypto often but security is much higher.
While this is the main distinction, there are also other things that you need to consider.
The Five Main Bitcoin Wallet Types
- Hardware Wallets
Hardware Bitcoin wallets store private keys on hardware devices. They are usually cold and highly secured. However, in order to buy such a wallet, you do have to spend more money. This is why many recommend using hardware wallets when you intend to store at least $1000 value for a longer time.
Some examples of really popular Bitcoin hardware wallets include: Ledger, Trezor and KeepKey.
- Desktop Wallets
You install the desktop Bitcoin wallet on a laptop or computer. When the device is always connected to the online world, you classify it as being hot. Generally, such a setup is seen as secure. However, there is vulnerability to viruses and malware.
Examples of Desktop wallets include Electrum, Jaxx and Exodus.
- Mobile Wallets
These are software wallets that are similar to the desktop wallets but they are designed to work on mobile devices. Because of this, they are simpler and smaller. They are mostly to be used for day-to-day regular use.
Examples of Mobile wallets include Electrum, Jaxx and Breadwallet.
- Web Wallets
These are generally considered to be less secure. However, they are highly convenient, especially for those that do not have a lot of money put into Bitcoin. These wallets include exchange wallets, website wallets, browser plugins and similar.
Some examples of web wallets include Coinbase, Binance, Xapo and Guarda.
- Paper Wallets
These are usually labeled as being cold Bitcoin storage. Basically, this means there is a paper print or a physical copy of the private and public keys. Software was utilized to generate keys and they were printed. The paper wallets will grant high security levels. Bitcoin Paper Generators can be used to generate paper wallets for your Bitcoin.
Obviously, in this case the big problem is that durability is much lower than with other options. Storage conditions of paper wallets become vital.
What Bitcoin Wallet Type Should You Choose?
You want to consider the online Bitcoin wallet option when:
- Just a small Bitcoin amount is stored.
- You do not mind losing how much you store.
- You do not have the money to pay for a paid wallet.
- You are mainly interested in user experience.
- You do not care about privacy.
- You trust that third party you choose.
- You want to have web access from a computer or your phone.
- You have to share the Bitcoin wallet.
You want to consider the offline Bitcoin wallet option when:
- Security is really important.
- You want to store a lot of Bitcoin.
- You do not trust a third party to store your Bitcoin.
- You can afford the hardware.
- You are interested in privacy.
You can, of course, use both cold and hot Bitcoin wallets.
Evaluating The Bitcoin Wallet
After you decide on the type of Bitcoin wallet you will use, it is time to evaluate the options you find. You are mainly interested in:
- Cryptocurrency support – is only Bitcoin supported or are there other cryptocurrencies you can store there?
- Is proper security in place?
- How secure is the authentication process? You want to see two-factor authentication.
- Is there multi-signature available? This is needed when there are multiple owners.
- The transparency of the provider.
- Is the code open source?
- How easy is it to use the Bitcoin wallet?
- Can the wallet be backed up?
- Is there a community opinion about the considered Bitcoin wallet? Never underestimate what you can learn from user reviews.
- Potential fees.