Bitcoin Wallets

How to choose a wallet for storing my Bitcoins?

I strongly believe that choosing a good wallet is the most important part of learning how to use bitcoin. Using a safe storage solution is not an easy task. In fact the most convenient wallet systems (web-wallets) are usually the most unsafe. Thankfully there are many extremely safe options for holding your bitcoins.

To keep things simple, just remember that the private keys of your wallet are what enables sending the coins elsewhere. The safest storage solutions are those where the private keys are kept hidden away from the outside world to see.

Use the following table to quickly compare the advantages and disadvantages of each wallet type:

Use the following table to quickly compare the advantages and disadvantages of each wallet type:

Wallet Type

Safety

Beginners

Convenience

Cost

Web

unsafe

easy

very convenient

free

Mobile

unsafe

easy

very convenient

free

Desktop

safe

average

average

free

Hardware

very safe

average

not convenient

90 – 400 usd

Paper

very safe

difficult

not convenient

usually free

Multi-sig

safe

difficult

(variable)

free

A comparison of the different bitcoin wallet types

Web-Wallets

Online web-wallets are websites or even online exchanges that allow storage. As I mentioned above, this is the least secure option as it usually involves leaving the management of your private keys to a web server. Web servers are prone to hacking, and users must also trust the online wallet operators. It is however a really convenient way to keep a couple dollars worth of bitcoin online for quick and easy payments. If you have large amounts, then never keep it all in a web-wallet.

Here are some good web-wallets:

  • Blockchain.info – Simple user interface, no ID verification needed to use it. HQ based in Luxembourg
  • Greenaddress – Synced wallet that works across your devices. Browser extension and smartphone.
  • Coinbase standard wallet (insured storage) – Super popular, based in US. No fees to send BTC to other Coinbase wallets.
  • Coinbase cold storage (for advanced users) – Extra safe multisig wallet with redundancy in case of website failure.

Mobile Wallets

A mobile or smartphone wallet is, as the name suggests, a bitcoin wallet on your smartphone. Mobile wallets are great, because it is really easy to scan QR codes with your phone’s camera to make quick payments to friends, merchants ad shops that accept bitcoin. The names may vary, but mobile wallets are as unsafe as web-wallets in terms of private key security. This is because most mobile apps automatically update by themselves. If a hacker gets access to the developer’s iTunes / GooglePlay account then they could potentially infect and steal millions of users wallets as their next update gets pushed through. Nevertheless, this type of wallet is great for having small amounts ready to pay when you are out and about.

The best mobile wallets for iOS and Android are:

  • Breadwallet – simplest wallet for iPhone and more recently available on Android
  • Mycelium – HD wallet with many features including support for Ledger & Trezor (hardware wallets), Tor (a privacy-focused mesh network), watching addresses.
  • AirBitz – Easy to use and great for less technical users
  • GreenBits – Functional yet basic and support for Ledger + Trezor.

Desktop Wallets

Desktop wallets are apps installed on a desktop computer or laptop. Many people store significant proportions of their bitcoins in desktop wallets as these are much safer than web or mobile wallets. If you asked me a few years ago, I would have said that this is the safest way to store bitcoins. Now, in 2017, with all the backdoor hacking stories, I would prefer using a variety of offline wallets (desktop, hardware, paper) to store my bitcoins. If you are comfortable with ensuring your PC’s security and/or using a Linux system (Windows is considered the least secure operating system) then this may be a relatively secure option for you. A desktop wallet could also be an option for keeping a certain percentage of your portfolio.

I really like these desktop wallets:

  • Electrum – most popular desktop wallet because of simplicity. Users have to write down a seed when creating their wallet. Can be integrated with the Trezor or Ledger hardware wallets.
  • Armory – a very secure and feature-laden desktop wallet for advanced users. Offline signing options make this extra secure. Note: this wallet requires BitcoinCore to function. Bitcoin Core is the original Bitcoin desktop wallet, but it needs to download the whole blockchain (>100GB large!) to work. I have not listed Bitcoin Core here for this reason.

Hardware Wallets

Hardware wallets are very sophisticated semi-cold storage (mostly offline) systems. A piece of hardware is used to store the private keys to your bitcoins. Every time you want to send coins then you’ll just connect the hardware wallet to a PC and then take it offline again once the transaction is complete. Keep in mind that you have to buy hardware wallets, unlike the other types of storage solutions which are mostly free. Although you still have to trust the hardware-wallet manufacturer & suppliers, many people claim that this is the safest type of bitcoin wallet.

Here are some popular hardware wallet systems:

Ledger

Ledger Wallet protects your bitcoins

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The Ledger Nano S is a multi-currency hardware wallet, featuring a screen for payment validation and architected around a secure element for maximum protection of your assets. It is relatively cheap. It is also the most popular hardware wallet. The other Ledger products are also good, but the Nano S stands out as the best option for price, ease of use and security.

Trezor

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Easy to use for beginners to use and it has a nice user interface.

TREZOR is a single purpose device which allows you to make secure Bitcoin transactions. With TREZOR, transactions are completely safe even when initiated on a compromised or vulnerable computer. Because the use of TREZOR is very easy and intuitive we believe it will help Bitcoin adoption among people not familiar with the security issues.

We like Trezor so much you can visit our dedicated Trezor page by clicking here.

Note: some experts suggest that hardware wallets are not real cold storage (completely offline) because they require USB connections to make transactions.

Paper Wallets

In the opinion of many people using a paper wallet is the most secure cold-storage solution available (more so than hardware wallets). With a paper wallet you only have to trust the wallet-creating software and the physical location that it will be stored in (usually a safe in a bank or at home). As with all super-secure solutions, this is the least convenient as you’ll need to create a new paper wallet every time that you want to send bitcoins somewhere. If you are planning to hold on to your cryptocurrency for a long time without spending it, a paper wallet could be a super-safe option for you.

Here are some trustworthy paper wallet systems:

  • Coindesk has a guide for how to make a paper wallet
  • Bitaddress – is a client side paper wallet generator. It’s open-source and written in Javascript.

Multi-signature Wallets

Most bitcoin wallets simply need one private key signature to make a transaction. Multi-signature wallets require multiple private key signatures to make a transaction. For example, if you wanted to send bitcoin you would first need to authorize the transaction, and then another trusted person would also need to authorize it. Neither you nor the other person can make a transaction on your own. Both parties require the other’s consent (signing) to make a transaction. This allows for some pretty advanced features and very safe storage solutions. This type of wallet is great for business using bitcoin.

Multi-signature capabilities are sometimes available in web, smartphone, desktop, and hardware wallets.

These wallets offer multi-sig capabilities:

Hot vs Cold Wallets

The terms “hot” and “cold” are used to describe the online connectivity of a bitcoin wallet, and by extension, its risk factor. Here is the difference between the two:

A hot wallet is constantly connected to the internet with the private keys loaded ready for use. For this reason a hot wallet is riskier because a hacker can theoretically access the private keys if they find a vulnerability. Sometimes people use the term “online wallet” interchangeably with “hot wallet”. Hot wallets make it easy to do transactions quickly and on the go. Web, smartphone, and, to a certain extent, desktop wallets can all be considered “hot” wallets.

A cold wallet is not connected to the internet and the private keys are offline. Sometimes people use the term “offline wallet” interchangeably with “cold wallet”. Cold wallets are therefore safer because hackers would have a very hard time accessing your private keys. Some cold wallet systems need to connect in order for transactions to be made. Others allow transactions to be signed completely offline and subsequently broadcast it to the bitcoin network (without connecting the private keys). Hardware (USB) and paper wallets are popular cold wallet systems.

The term “warm wallet” is occasionally used by experts when describing cold wallet systems that must connect to the internet to make transactions (most hardware wallets must do this). A warm wallet can be defined as a mix between a cold wallet and a hot wallet. Warm wallets are therefore not as safe as pure “cold” wallet systems, but they offer some of the conveniences of a “hot” wallet.

Watch Andreas M. Antonopoulos (a bitcoin expert, author, and entrepreneur) talk about his personal wallet choices: