The primary step to use Bitcoin is to have a bitcoin wallet.
Without the wallet, nobody can store, receive and spend bitcoins.
In the Bitcoin network, the wallet is considered your personal interface; the same setup with your bank account online is an interface with the usual monetary system.
Bitcoin wallets have private keys; secret codes enabling you to use your bitcoins.
In real life, it’s not really the bitcoins that needs to be secured and stored, but it’s the private keys that are important since it’s give you access to them.
A BTC wallet is really just a website, device or an app that manages private keys of Bitcoin for you.
Let us talk about the different bitcoin wallet types and why you should choose one kind instead of the other.
An actual electronic device, a hardware wallet is created mainly with the intention of securing bitcoins.
The central idea is before you can able to spend your bitcoins, the hardware wallet should be connected to your phone, tablet or computer.
The three best and most famous BTC hardware wallets are:
Ledger Nano S
If you are a person who takes convenience and security seriously as well as the reliability of Bitcoin storage, then hardware wallets is really the best choice.
The BTC hardware wallets store private keys distinct from susceptible, internet-connected devices.
All your important private keys are retained in a safe offline environment inside the hardware wallet, hundred percent protected even if the device is plugged into a computer that is malware-infected.
Since bitcoins are digital, cyber criminals could possibly prey the “software wallet” of your computer and access your private keys to steal them.
The process of generating and keeping private keys offline by the use of a hardware wallet, makes certain that there’s no way hackers can reach to your bitcoins.
Hackers then have to steal primarily the hardware wallet, but even then, a PIN code protection is still there.
Do not mind about the hardware wallet being lost, damaged or stolen either; as long as a secret backup code is created, bitcoins can always be retrieved.
Simplest way to securely keep bitcoins
Easy to secure and backup
Margin for error is less; easy to setup even for non-technical users
It’s not for free!
Bitcoin wallets that function through devices with internet connection like mobile phone, tablet or computer are called hot wallets.
Private keys are considered secret codes. Since hot wallets create the private keys using a device connected with the internet, these private keys cannot be considered totally secured.
Simplest way small bitcoin amounts can be stored
Convenient; payment receiving and spending is fast and easy
Access to funds in multiple devices are allowed on some hot wallets
Unsafe for storing securely large bitcoin amounts
Which wallet is the best for you?
Why do use Bitcoin?
For savings or investment? Then your coins will be safe by using a hardware wallet.
Using a software wallet otherwise, will still send and receive bitcoins just fine. What’s great is that software wallets are for free.
Different wallets are made to deal with different problems, each having pros and cons.
There are wallets that prioritize security; some are focused more on privacy.
Your needs specifically should decide what wallet you will use, since there is no such things as “best bitcoin wallet”
Hardware wallets of course are not free.
But the price won’t matter if you have a big amount of bitcoins. A hardware wallet protects just as effectively as regardless of any amount of bitcoin you have.
How Does Hardware Wallets Work
Hardware wallets are offline secured devices. Your private keys are stored offline for hacking prevention.
It means that you can readily use one even on a computer that is malware infected.
Seen in a table below are different hardware wallets and which ones have screens.
Screens give extra security through displaying and verifying important details of the wallet. Since it’s almost impossible to hack a hardware wallet, the screen makes it more trustworthy than data seen on your computer.
A quick comparison can be seen in a table below. Note:
A detailed comparison was also done of the three main hardware wallets: Trezor, Ledger Nano S, and KeepKey.
Ledger Nano S
It is considered the lowest-priced among the three screened hardware wallets and it costs for about $65. This device was released by Ledger (among the most famous Bitcoin security companies) in August 2016.
Released on September of 2015, Keepkey was the second hardware wallet to propose a screen. Its larger screen offers some extra safety and security features which the Trezor and Nano S lack.
It was introduced as the first hardware wallet of Bitcoin which offers secured bitcoin storage as well as the convenience of using it as a hot wallet in spending and also, it was launched in August of 2014. TREZOR is a tiny device and has only a size of a thumb.
This one is known to be a budget kind of a hardware wallet. It doesn’t bear a screen making it quite less secure compared to the three ones mentioned above. However, it will give more security compared to a hot wallet.
Just a short refresher:
Hot wallets are also Bitcoin wallets but runs on devices connected to the internet like mobile phone, tablet or computer. Since it creates private keys on devices with internet, the private keys are considered not 100% secured.
Web wallets keep private keys online, in which they’re hidden with a password that is selected by the user. Even though they have the lowest form of security, bitcoin wallets online favors in a way that it can be access through any devices connected to the internet.
GreenAddress is a Bitcoin wallet that is multi-signature available on desktop, web, iOS and Android. It is also compatible with wallets like Ledger Nano, HW.1 and the TREZOR.
In this context “multi-signature” means that the website needs a confirmation manually from you for the coins to be transported, thus greatly improving security.
There are lots of Android wallets to choose from. Developers focused more on developing wallets for Android since Apple originally banned Bitcoin wallets.
Android’s most famous Bitcoin wallet is Mycelium. Using it for payment sending at receiving is very easy. Since Mycelium provides good instructions for setup and backup, backing up your own wallet is very easy as well.
breadwallet is a great Bitcoin wallet for iPhone, released recently a wallet for Android. It bids the user an easy interface to use, passcode support and private keys control.
This Bitcoin wallet is also readily available for Android. It is simple to use and gives out a number of advanced features which gives great flexibility.
It is a bitcoin wallet simple to use for Android and iPhone. The login feature is so familiar making it easy to use for people who just knew bitcoin. The wallet also makes backups automatically, so you need not to worry regarding technicalities of doing wallet backups manually.
A native version of Android for GreenAddress, GreenBits is wallet that multi-signature as well that supports co-wallets like Ledger and TREZOR.
Bitcoin Wallet, also known as “Schildbach Wallet”, was the pioneer Bitcoin wallet for mobiles. Mobile bitcoin wallets are less secured than bitcoin wallet since it directly connects to the network of bitcoin. Bitcoin wallet possesses a simple interface with features in just right amount making it a good wallet and a perfect tool for education of Bitcoin newbies.
In February of 2014, Apple forbid Bitcoin wallets from its App Store, and disbanded it however after just a few months has passed. Fortunately, there are several options for iOS users now.
breadwallet, together with Copay are considered the best iPhone bitcoin wallet. It is open source and grants the user 100% control of their private keys. It also possesses a clean interface making bitcoin sending and receiving a super easy and pleasurable process.
This bitcoin wallet is the open source wallet of BitPay. It can be utilized across different devices, because Copay is accessible for all desktop platforms, Android, iOS and Windows Phone. Apart from those, making multiple accounts is easy so separate wallets can be made for personal funds and business.
Airbitz is considered simple to use Android and iPhone bitcoin wallet. The login feature is so familiar making it easy to use for people who just knew bitcoin. The wallet also makes backups automatically, so you need not to worry regarding technicalities of doing wallet backups manually.
Desktop wallets can be downloaded and then installed on your PC. If your primary concern is privacy, a great option is the core wallet of bitcoin since it doesn’t count for data on third parties.
Windows, Mac and Linux’s Bitcoin wallet is a light weight one and is called Electrum. It was made in November 2011. Its primary features are: hardware wallets support) such as KeepKey, Ledger Nano and TREZOR) and offline computer using for securing Bitcoin storage. Electrum is a great option for both novice and advanced users.
Copay as well is also readily available on desktop. The desktop app allows you to personally manage your hardware wallets the same with all other characteristics discussed above.
Another thing to remember regarding bitcoin wallets is that there’s a distinction between a bank and a wallet. Some users of bitcoin see Coinbase as a wallet, but this company functions much more like a bank.
The private keys primarily are the most important things users need to secure to run the bitcoin network safely without getting hacked. By the time you give somebody else control of your private keys; you are just like depositing at a financial institution – in other words like depositing at any bank.
This doesn’t imply that banks of bitcoin are inherently bad. Coinbase and other companies have done a lot of things to attract more customers in the ecosystem. It’s simply vital to take note that whoever has control of the private keys automatically control the attached bitcoins to those keys.
Due to a misunderstanding of this topic has contributed to the loss of hundreds of millions in US dollars in the past, so it’s very vital to know and understand deeply the huge difference in how private keys in Bitcoin can be stored.
Enough knowledge about how bitcoin wallets operate is a very important element to use safely this new technology. Bitcoin is currently in its younger years of development so wallets in time will be much friendlier to the users.
Futuristically, some devices will eventually come with wallets that are pre-installed that will interact together with the blockchain without even the knowledge of the user.
So far, it’s important to note that private keys are the one you need to safely secure if you wish to keep safely your bitcoin from user errors, hackers and other issues possible.
No matter what wallet you select, take note:
Your bitcoins will be safe only through the private keys that were securely generated, remained a secret and most especially controlled by no other person but YOU!
These are the two examples in which users lost a lot because of leaving their bitcoins in a third party hand:
The Bitfinex hack, where seventy million dollars was lost from the users
The Mt Gox failure, where four-hundred fifty million dollars or more was lost from users
To prevent scams, theft and any other forms of fund loss, take note of these three (3) basic principles:
1. Create your private keys through a secure and offline environment. (Except for cases where your keys are made by a hot wallet, like trivial amounts)
2. Secure your private keys through a backup. This assists in protecting against bitcoin loss due to failure of hard drive or some other accident or problems. In an ideal setup, the backup should be in a duplicate set that’s kept in another site in cases where there’s robbery, fire, etc.
3. Hide wallets to give additional security. This will help in the prevention of stealing your funds physically in cases where your hardware wallet or device is stolen.
Securing bitcoins safely is the most vital step for any users of Bitcoin.
Having bitcoins does not only give you a privilege but the responsibility as well to safely guard your own money. There is innumerable scam that is Bitcoin related that should have been avoided and prevented if the people did not entrust their bitcoins to others.
It’s a perfect rule not to ever trust someone especially with regards to money.
Written on 19 Dec 2010.