Are you looking for the right bitcoin wallet for your needs? In this chapter we will help you find exactly that! The first step before you want to buy bitcoins is to choose a bitcoin wallet.
Well, now you might be wondering.. a wallet? Why would a digital currency need a wallet? Storing your bitcoins in a personal wallet is the safest way to use and store your Bitcoin. It’s for that very reason that we strongly advise you to transfer your Bitcoin to a private wallet. If you choose to leave your Bitcoins with a platform such as an exchange you always run the risk that the platform goes bankrupt or that it is hacked. Which means that you have lost your bitcoins.
Of course, the chance of this happening is very small, but it’s not a big problem to set up a wallet. So there should be no excuse for not having your own wallet for your valuable bitcoins.
What is a Bitcoin Wallet
A Bitcoin wallet is a digital wallet for your Bitcoins. Just like Bitcoins are a digital form of physical money, a Bitcoin wallet is a digital translation of a physical wallet.
In a Bitcoin wallet, you can create and manage Bitcoin addresses. A Bitcoin address is similar to a bank account number that you would receive from your bank. But as you already know Bitcoin does not have a central manager (so in this case a bank) that does that for you! So you can make Bitcoin addresses yourself. So unlike your bank, you can create as many addresses as you desire, free for charge.
A Bitcoin address consists of a private key and a public key that both contain a series of numbers and letters. And they look like this: “1KV2ybMT5vUmEepogj5F75si1ob455zade” . The public key is what you give to a person or organization that you want to receive bitcoins from. The private key is what you use to send/spend Bitcoins. It’s important that you ensure that your private key is always safe and not visible to others. In short, a public key is for public eyes, while a private key is for your eyes only.
The usage is almost identical to how you would do it with a traditional bank account. The only difference is that you have two separate numbers for sending or receiving bitcoins. If you want to receive bitcoins, all you have to do is give your public key to the person in question. A nice extra in terms of technology is that you can often make payment by sending or scanning a QR-CODE to perform these actions. What if you actually want to send bitcoins? In that case, you only need access to your private key and the public key that is requesting payment.
Types of Bitcoin wallets
There are 5 types of Bitcoin wallets to choose from, and you can certainly be a bit overwhelmed if you just step into the world of Bitcoins. But do not worry, that’s what this guide’s for! So let’s look at what you can choose from:
‘Cold’ and ‘Hot’ Bitcoin wallets
Before we dive into which types of wallets are available to choose from. It’s wise to explain what is meant by ‘cold storage’ and ‘hot storage’ when we talk about Bitcoin wallets. These are terms that you will often encounter in your choice!
All types of Bitcoin wallets can always be classified in Hot or Cold wallets.
Cold Bitcoin wallets
Cold Bitcoin wallets are wallets that are not connected to the internet. You usually have the currency in your hands, this could be in the form of a USB stick or just paper. As a result, this way of storage is often considered safer.
Cold storage is more suitable for the long-term holders of bitcoin that will be held without trading or spending. Similar to a savings account!
Hardware Bitcoin wallet
Hardware bitcoin wallets are the safest way to store your bitcoins. A hardware wallet is a small computer or smart card that is specifically built for generating Bitcoin private keys offline. Hardware wallets are a form of cold storage and are the best way to store your bitcoins for a long time. We also strongly recommend that if you own a large number of bitcoins, you can transfer your bitcoins to a cold storage.
Hardware bitcoin wallets are aimed at Bitcoin owners who want to store a large number of bitcoins for the long term. Hardware Bitcoin wallets also do not require you to trust in a third party to store bitcoins, which is the case with almost all other wallets!
Because of the popularity of these types of wallets and that of Bitcoin, there are more and more options every year when it comes to these types of wallets. At the moment, however, there are 3 wallets that are clearly performing the best and are therefore the most popular with Bitcoin owners.
Paper Bitcoin wallet
Believe it or not but just like a real currency, you can choose to keep your bitcoins on paper. It is a cheap option to keep your bitcoins safe and long-term.
It goes like this! You create a paper wallet through a website that offers this service. With this service, you will be assigned a bitcoin address and a picture with two QR codes. One of these QR codes is the public address that you can use to receive bitcoins; the other QR code is the private key, which you can use to send bitcoins from the paper wallet.
The advantage of a Bitcoin wallet made of paper is that the private keys are nowhere stored digitally, and thus never endangered by cyber attacks or hackers.
The disadvantages of this are that ink and paper can degrade and if that happens you have lost your bitcoins forever. This brings us to the second disadvantage and that’s you can’t make a backup of your paper wallet. If you have lost it, you have lost it and also all your bitcoins.
Hot Bitcoin wallets
Hot bitcoin wallets are called hot because they are connected to the internet. They are most suitable for regular use, and therefore most suitable for people who need regular access to their bitcoins. The disadvantage is that this form of storage is often seen as less safe than ‘cold’, because the responsibility lies not with you but with a third party.
Unsafe is an extreme view of this type of storage. It assumes that big companies can just be bankrupted or hacked, the chance that something like this is of course very small.
Bitcoin desktop wallet
These bitcoin wallets are made to be downloaded and installed on a desktop or laptop. They provide easy access to your bitcoin; even if your computer is not connected to the internet!
If you already have the original bitcoin client installed on your computer then you already have a bitcoin wallet, even if you don’t know it! In addition to keeping track of all transactions within the Bitcoin network, this software also allows you to create a bitcoin address!
A desktop Bitcoin wallet has some drawbacks; namely that it’s only accessible on the computers on which they are installed. In addition, it also has the extra risk that there’s a possibility that a virus hacks your wallet.
BITCOIN MOBILE WALLET
A desktop wallet is not very useful when you’re out on the street, and you want to use your bitcoin to make payments!
In this case, a mobile wallet is much more convenient! This wallet comes in two forms, one where you install an app on your phone. Here you also have mobile bitcoin wallets that work with a debit card, just like your normal debit card!
Bitcoin debit card
Why would you use separate platforms and not just use and store your bitcoins if you would also do that with a traditional account? The advantage of this option is that you get a payment system with a payment card just like you are used to. With this card, you can simply withdraw money and also pay at the local supermarket. In other words, it is a bitcoin wallet linked to a payment card that works with the VISA and MasterCard payment system.
These debit cards automatically convert bitcoins within the wallet (which is online) to cash based on the current price of bitcoin. The Bitcoin wallet itself is online on the server of the supplier. This has the advantage that you have access to your wallet from anywhere in the world, and it is not linked to a computer or telephone. In addition, with this option you obviously have the great advantage that you can pay on the street with your bitcoins!
The disadvantage is that this is a Hot bitcoin wallet and so you have to trust that nothing goes wrong with the third party (the supplier of the card). It is therefore not suitable to store large quantities of bitcoins. But it is ideal if you want to put a small amount of money on the wallet that you actively use!
The two most popular providers of these types of wallets are:
Bitcoin wallet app
This is a mini Bitcoin wallet that can be installed on your phone as an app. It is not a complete client like other clients. That is, of course, logical, since a real client should download and store the entire blockchain. That would not be very nice for the data usage of your mobile phone.
These applications are specially made with simple payment verification. They only download a small part of the blockchain and rely on other trusted nodes in the bitcoin network for the right information.
The disadvantage is of course again that you still have to rely on a third party, and that it is not a full-fledged client. It is a wallet that is more served for small amounts that you can use to spend.
It is generally known that Apple is not a fan of Bitcoin wallets at all; it therefore happens that one of the three apps mentioned above, temporarily or … permanently do not provide iOS support.
How do I safely use my Bitcoin wallet?
Make sure you encrypt your Bitcoin wallet with a strong password. In the world of password security, the length is much more important than complexity.
We strongly recommend that you use a sentence as a password that you can easily remember. A good example of this would be “Thisisareallygoodpw.”; this would cost a computer 2 years to crack.
Regular backups of your wallet are also highly recommended. All your private keys are stored in a wallet, but if something happens to that, then you have lost all your keys.
Making backups of your wallet that you store in several places is important. It is also the safest way to be sure of the safety of your bitcoins.
More and more bitcoin wallet providers offer multi-signature transactions as standard with their Bitcoin wallet. This system ensures that multiple parties must consent to a transaction taking place at a particular address.
In other words, imagine you want to send 10 bitcoins from your wallet; then all multisig users linked to your wallet must also approve the transaction. Only then can the transaction be executed.
Together with your spouse or partner, you can be sure that your bitcoins will never be spent without approval. You can also choose to use multisig with multiple devices. This means you do not need more people, but instead you have to approve the transaction yourself on multiple devices.
Frequently Asked Questions
They are safe depending on how you handle them. The private keys stored within the wallet are the only way to access the content.
As long as you don’t lose these keys, and keep them safe, no one can just access your coins.
Bitcoin is a blockchain, ie all transactions and wallets are public and transparent. So Bitcoin is not an anonymous network at all.
However, it is true that a Bitcoin wallet is not linked to a name or address, so it is not easy to find someone via the Bitcoin network. This would require a process of tracking IPs. For this reason, Bitcoin is often considered pseudo-anonymous. However, it is possible to make anonymous use of your bitcoins. We discuss buying anonymous in bitcoin.