How to choose a bitcoin wallet

Bitcoins are stored digitally. This means in order to store some yourself you will need a bitcoin wallet. Much like shopping for a physical wallet you carry around with you to spend cash, when you start shopping for a bitcoin wallet you are confronted with a great many choices. In this article we will explore the options available when it comes to acquiring a new bitcoin wallet.

Hot and cold

The first decision you need to make is whether you will store your bitcoins hot or cold. Any wallet that is connected to the internet is termed a hot wallet, whereas a wallet that is disconnected from the internet, such as a paper wallet, is referred to as a cold wallet.

That’s right you heard me right, if you so choose, you can store your bitcoins on paper. Paper wallets are great for security but they are not very practical, to use your funds you need to upload your off-line private key into a digital wallet. For this reason paper wallets are best used for long term storage only. If you lose your paper wallet you have lost your funds, so be sure to secure the paper you store your wallet on securely (i.e. in a fireproof safe). If you would like to make your own paper wallet bitcoin.com have an easy to follow guide.

Web or mobile?

Software based wallets come in three main varieties: web, mobile or desktop. Web solutions are usually the most convenient. With a web based solution you trust the wallet provider to securely store your private key online. A popular web based wallet is blockchain.info another is coinbase.com. Web based wallets are super convenient but generally not recommended if you are storing a significant quantity of money. If you are using a web based wallet and are concerned about anonymity, be sure to choose a wallet provider that supports HD wallets.

A HD (Hierarchical Deterministic) wallet allows you to create many wallets from one seed.

A HD seed is a series of words, in a random order, used to generate your private key. When using a HD wallet as well as being able to generate multiple wallets linked to the same private key, you are also able to recover your private key should you need to by utilizing the HD seed.

Mobile wallets are similar to web based wallets but, as the name implies, are designed to be used on mobile devices. Mycellium and Airbitz are two popular mobile solutions. These apps allow you to download a simple app onto your Android or Apple IOS phone and have your wallet setup in minutes.

Desktop wallets

A desktop wallet offers better protection than a web or mobile based wallet. With a desktop wallet, you and you alone are in control of your private key.

Your private key is stored on your hard drive and in the case of hardware failure providing you have made a backup of your private key you can recover it.  However, if you have malware on your computer, someone could potentially access your private key, and if they can access your private key they can access your funds.

If you are concerned about security it is advisable to only connect your desktop wallet to the internet when you are actually transferring funds and ensure your virus protection is up to date, but you will need to have another computer for your day to day internet use if you take this extra step to secure your desktop wallet.

The most popular desktop wallet right now is Electrum. There are a number of reasons for this.

Electrum looks like it was designed about ten years ago judging from the UI, but don’t let this fool you.

It is very robust, and it is also secure. The strength in security comes from the fact that Electrum is open source, so the source code for the application is in the public domain. Another great feature of Electrum is the fact that it allows you to increase the mining fee you’ve sent after you have broadcast your transaction. This means if a transaction is taking a particularly long time, you can increase your fee, in the hope that you will speed it along.

Hardware wallets

Hardware wallets (cold because they are disconnected when not transacting) offer a great balance between security and convenience. Your private key is stored in a gadget that plugs into your PC, and this device must be plugged in to the internet to transact with your funds. Two of the more popular hardware wallets are Ledger and Trezor.

Hardware wallets are a great all round choice for medium to long term storage of your bitcoin funds.

Conclusion

In summary you have a great array of choices available to you if you are in the market for a new bitcoin wallet. My personal favorite for day to day transactions is the web based solution blockchain.info because I love the simplicity of the software, it supports 2fa (two factor authentication), and is also HD so I can use multiple wallets, and easily recover my private key if I lose access to my account. For more secure storage of bitcoins that you do not need to transact daily with my advice is to use a hardware wallet.

Then of course if you want to be completely secure, you can go ice cold and make your very own paper wallet. The choice as they say, is yours.