Of all the thousands of cryptocurrencies in existence, Bitcoin has remained the most popular and most reliable. We know this because of the continual increase in price of one BTC and the market cap. With these realities in the crypto world, the need to choose and use a reliable Bitcoin wallet becomes more pressing.
What is a Bitcoin Wallet?
A Bitcoin wallet, in simple terms, refers to a storage or savings system for your Bitcoin. Think of the real wallet we carry around for credit cards, IDs, dollar bills, and so on. Whereas this wallet/purse is physical, the Bitcoin wallet isn’t necessarily tangible. It could be a hardware, software, paper or electronic wallet.
But the key difference between the real wallet and the Bitcoin wallet is that it doesn’t actually contain the Bitcoin. Rather, it stores the private key which is your access to your Bitcoin address. See your Bitcoin wallet as your bank account which allows you to be linked to a single bank under the monetary system. Your wallet address is, therefore, your account number, and as it is in the real world, you can have many wallet addresses.
With your Bitcoin wallet, you can access your Bitcoin address and perform any transaction with your coins. Such transactions include sending or transferring funds or making payments online.
So, even though the wallet serves as a means of sending and storing Bitcoin, its actual function is to manage your private keys. A more secure version of the private key is the public key which provides further encryption of your access codes. This combination of numbers and letters are unique (secret number) to each user.
How to Choose a Bitcoin Wallet
Indeed, without a Bitcoin wallet, you can’t access Bitcoins. Getting a wallet is, therefore, a primary step when investing in Bitcoin. Thus, choosing a Bitcoin wallet is as important as buying a wallet to keep your physical cash. Inasmuch as you can’t see Bitcoin (since it’s a digital currency), you need to choose a wallet that’s convenient, secure, and easy to use.
There are five main types of Bitcoin wallets which come with pros and cons. While none is devoid of downsides, the hardware wallet has always topped the list on Bitcoin wallet reviews.
- Mobile BTC Wallet
With a mobile Bitcoin wallet, you can easily make transactions such as paying for products and services on a daily basis. By installing this app on your smartphone, you can pay your vendors and stores with ease. It works with iOS, Windows, and Android devices.
Even though its “pay as you go” functionality is a major upside, the mobile Bitcoin wallet is susceptible to internet attacks. Also, your Bitcoin can be tampered with if anybody gains access to your mobile device. Copay and Jaxx are examples of mobile BTC wallets.
- Paper Bitcoin Wallet
The paper Bitcoin wallet contains a QR code which you generate from a service that provides your Bitcoin address. This paper contains your private key and wallet address, and you should treat it with much care and discreteness.
What makes this wallet preferable is the fact that it can’t be hacked by fraudsters, and it requires no form of network connection. However, if you must choose the paper BTC wallet, be prepared to protect it from wear and tear and other forms of damage.
- Online Bitcoin Wallet
Exchanges are the most common forms of online or web Bitcoin wallet. They allow users to store their funds on their server and make transactions with minimal required fees.
While this wallet also promises convenience, it’s not always the number one choice. Why? Not all exchanges are reliable. Some are guilty of stealing users’ funds since they have access to their private key.
Some trustworthy exchanges include Coinbase, Cryptopay, and Xapo.
- Desktop BTC Wallet
If you want a BTC wallet that’s better than the mobile and online wallets, choose the desktop Bitcoin wallet. You only have to download and install it on your computer. Although it’s still connected to the internet and allows limited Bitcoins, the fact that your private keys are stored on the system hard drive makes it slightly more secure.
Linux, Mac OS, and Window devices support the different types of desktop BTC wallets. Bitcoin Core, Electrum, and Armory are some of the most common choices.
- Hardware Bitcoin Wallet
The only Bitcoin wallet that can store both small and huge amounts of Bitcoins is the hardware wallet. It provides an interactive user experience and offers the most security. Using an open source software adds to the credibility of this wallet, apart from the fact that hacker attacks and viruses cannot get through it.
TREZOR, Ledger Nano S, and KeepKey come with a screen and PIN code among other things. These allow the user to verify his/her details and transaction information before sending Bitcoins. The only drawback with this type is the cost (up to $100).
Bitcoin Wallet Security
Protecting your Bitcoin wallet is as important as protecting the Bitcoins in them. Your private key must always remain private, and this is why using a mobile wallet isn’t advisable. In the event that you lose your PC or phone, your wallet is as good as gone.
Also, you must keep your wallet secure from malware or Trojan. Any malicious software can access your wallet address information and wipe out your funds. The best solution is to choose a wallet that provides cold storage options. With such, you never have to worry about losing your Bitcoins to any theft case.
Another part of the wallet security is creating multiple backups which are secure and impenetrable. Water or fire could damage a Bitcoin wallet; thus, make several backups and store them in different places. Always backup your private keys, and keep your wallet encrypted. Plus, never use an address twice so that your identity doesn’t become known.
How to Create and Open a Bitcoin Wallet
The steps involved in creating a Bitcoin wallet are as follows:
- Visit the online wallet
- Download and install the app
- Create your account
- Provide identification (if required)
- Confirm two-factor authentication
- Export your private key.
By signing up with an exchange, for example, you get to send and receive Bitcoin. Remember to attach an email address for transaction purposes.
How to Transfer Money/Bitcoin to Your Bitcoin Wallet
If you use a hardware Bitcoin wallet, you only need to transfer your funds from cold storage to a hot wallet. With the aid of bank transfer, you can have someone send money to your Bitcoin wallet address. After this, try buying Bitcoin with the amount you have and that will be deposited in your wallet.
How to Recover Lost Bitcoin Wallet
If it ever happens that you lose your Bitcoin wallet, whether it’s a missing smartphone or hardware wallet, get a new drive or install the app a second time. Next, login with your previous private key (retrieved from backup), and ensure that you backup your details again.
This is often easier with a wallet recovery service. A word of caution – always backup your private key. There are cases where lost is forever gone.
Choosing a Bitcoin wallet is a crucial part of investing in cryptocurrency. If you’re undecided about which wallet to choose, contact us now. We’re CryptoMentor, and we’re eager to guide you on making a rewarding choice.