Before you buy your first Bitcoin you need to make sure you have a basic understanding of how Bitcoin wallets work. This article will walk you through selecting the best Bitcoin wallet for your needs.
A Bitcoin wallet is basically an access key that lets you perform “send” operations to your chunk of Bitcoin on the blockchain. This private key is often embedded into a special mobile or desktop app, or a web-based dashboard – all those are called “wallets”.
A Bitcoin wallet could consist of, figuratively speaking, your public keys (i.e. the receive addresses), your private key (needed to authorize sending), an interface, and security measures (password, mnemonic phrase etc.)
Wherever your exploration gets you, remember several main principles of Bitcoin wallets:
So which Bitcoin wallet should you use?
It really is up to you as there are many great options on the market, both free and paid. The main rule of selecting a Bitcoin wallet is private key accessibility. Choose a wallet that lets you control your private key and does not store it on their servers.
Normally people opt for a hardware or a paper wallet for storing their Bitcoin savings (offline, or “cold” storage), and a web-based, desktop or a mobile wallet for everyday operations (“hot” storage) with smaller coin amounts.
We’ll get to the bitcoin wallet comparison with the most popular wallets and how to get them below in the article (also check our bitcoin wallet reviews), but now let’s continue with the foundation.
How to open a test Bitcoin wallet
Counterparty wallet is a good example, since it can work locally & offline: https://wallet.counterwallet.io/#
Let us use the Counterparty wallet as an example and run a quick Bitcoin wallet test to see how a wallet is set up. Head over to https://wallet.counterwallet.io/# and press “create wallet”. This is what we see:
The passphrase “depend gun curve lung question gasp blame nature either glow nearly stubborn” is all you need to enter the wallet. We (or you or anyone who has the key) can now go to https://wallet.counterwallet.io/# enter that key and open the wallet:
So are these 12 words the private key we talked about? Not really. But the mnemonic passphrase is just used to derive any set of keys for the wallet. Using the mnemonic key you can generate private keys for any other wallet, though that process would be pretty technical. The private key is more important in this regard, because you can import it (sweep) into any other wallet app or a client and have access to your balance without any cryptography. So let’s find our private key:
Click “address actions -> Show private key”. In the new window click “show private key” once again. Here is is:
This private key is what makes us REALLY control any Bitcoin we would have in this wallet*:
* Naturally, we are not going to deposit any Bitcoin into this wallet, since both the mnemonic phrase and the private key have been compromised by being published online. They have even been compromised by being copied to clipboard – sophisticated malware would be able to get it from there and send to a hacker. So this is just an example wallet that you can log in to right now and poke around.
Bitcoin wallets comparison
Web-based wallets are convenient but not as secure as a wallet can be. However, maximum security is often an overkill. Normally web wallets are used for small but frequent transactions and not for long-term storage. It’s really convenient to have all your passwords remembered in the browser but that is also the most vulnerable option of storing your coin. In any case, start by creating several web wallets to get a feel of all things Bitcoin and then move on to ordering a Trezor or a Ledger for your secure cold storage.
This wallet is extremely popular, because the blockchain.info website is a block explorer and people have been using it for a long time for looking up transactions, addresses, fees and tracing Bitcoin movements. Registering for a wallet at blockchain.info seems reasonable for many newcomers that consider it to be an “official” Bitcoin website (it’s not and there is none).
Blockchain.info allows you to buy Bitcoins from within your wallet dashboard and it’s pretty convenient since you can use a credit card and grab some Bitcoin any time, the fee is 3%. They are using coinify.com as the credit card payment processor for Bitcoin purchases.
Another good part about Blockchain.info is that they let you export your private key. The process is not easy but it still is an option, you can check for the details here.
This is another web-based wallet that lets you control your recover seed. This wallet has a corresponding mobile app and supports Bcash, Litecoin, Ethereum. The website and the app are geared towards quick and small transactions, that is why they have the Mecto option that matches nearby wallet owners using GPS data for quick Bitcoin transfers. Naturally, no web wallet is suitable for long-term Bitcoin holding, Coin.Space is not an exception.
BitGo is yet another web based wallet with corresponding desktop apps. BitGo processes your security data in a complex system of encryption, though you are not given your private keys. The strong development team is an advantage of this wallet.
Hardware Bitcoin wallets
A hardware wallet resembles a USB stick – it’s a small device that you plug into your computer and the firmware of the device is designed to securely encrypt your Bitcoin private keys.
A hardware wallet is a great option to store Bitcoin – it’s secure and durable, and if you are afraid of hardware failure you can export and print your private keys to store them securely.
Both Trezor and Ledger are highly praised by developers and savvy Bitcoin users for high security. One is a bit more expensive, the other supports more coins – it ultimately comes down to your own choice. Consider the infrastructure of each model.
Trezor has been extremely popular with developers and early adopters of Bitcoin. It supports several cryptocurrencies: Bitcoin, Litecoin, DASH, Zcash, Bcash.
The latest model that is available for pre-order is considered one of the most secure devices out there. The price of Trezor is currently €89which is a bargain for extensive coin security.
Ledger is a popular hardware wallet manufacturer and the product resembles a usb stick very much. The price is 69.60 € and it supports the following cryptocurrencies: Ark, Bitcoin, Bitcoin Cash, Dash, Dogecoin, Ethereum, Ethereum Classic, Expanse, Komodo, Litecoin, Neo, PivX, PoSW, Stellar, Stratis, Ubiq, Vertcoin, Viacoin, XRP a.k.a Ripple, Zcash.
Ledger wallet comes with an array of secure wallet management app – see the “apps” section of their site.
Mobile wallet apps
Mycelium is one of the most popular Android wallets. You can download it on PlayStore and use it for high-frequency bitcoin transactions (the HD mode) or for storing large amounts in a wallet with private key removed from the device. There is also a Bitcoin marketplace called Mycelium Local Trader, which allows direct goods exchange between users.
BitPay is a platform for everything re:Bitcoin payments. They have mobile apps (android, iphone), desktop apps, and a website login. In addition, you can order a Visa debit card to have your Bitcoin balance instantly converted into fiat for POS payments and ATM withdrawals.
BitPay allows you to extract private keys that are stored securely. The process is not intuitive for security reasons but it’s possible – see details here.
This is the Android app correspondent to the Blockchain.info web wallet service mentioned above. It’s a option to manage your Bitcoin, just make sure you back up your private keys.
Jaxx is a great cross-platform app that lets you manage your Bitcoin as well as other coins (). Jaxx has a Chrome extension, mobile apps and desktop software, all downloadable on their site. All private keys are accessible and exportable for your backups.
The best part about Jaxx is it lets you instantly exchange your available balance or part of it into any coin they support. That is great if you feel you should diversify your cryptocurrency portfolio without sending any of it to an exchange.
Electrum is an open source desktop and mobile wallet with all downloads available from their website. Their Android app is also listed on Google Play. Electrum is geeky and there are reports that their Linux applications are more stable than all other builds. Still, if you enjoy having full control of all your applications, use Electrum.
Not everyone needs a desktop wallet. A more regular setup for a Bitcoin user is a web wallet for frequent transaction + hardware wallet for storage, because desktop computers (especially Windows) have a lot of vulnerabilities. However, take a look at desktop wallets if you like to control all your stuff.
This is a full-feature Bitcoin wallet that would validate the whole blockchain on your computer. In a sense, this is the only way to be 100% sure that your transactions get through and synchronize with the whole Bitcoin ecosystem. You can get Bitcoin Core here.
Running the Bitcoin Core wallet on your computer 24/7 as a node also helps strengthen the Bitcoin network and keep it resilient. The only thing – make sure you have around 200Gb free space for the blockchain validation, and a broadband Internet connection.
Armory is a python-based full-featured Bitcoin wallet available for Mac, Windows and Linux. Get the latest downloads and documentation at the official Armory website. This wallet is secure and legit, as long as your operating system install is free of malware that would be one of the safest options to manage your Bitcoin.
Electrum is an open source desktop and mobile wallet with all downloads available from their website. Get the application for your OS and follow the instructions.
This wallet was mentioned in the mobile section but it also has a desktop app for Windows, OSx and Linux.
A bitcoin paper wallet could be the safest way of storing your coin for long term (check this amazingly thorough guide on making a paper wallet). With a properly created paper wallet none of your info can ever leak online or be compromised – unless someone physically takes the printed private key from you or takes a picture of it.
Paper wallets are often easily lost too, so if you ever create one make sure you keep it in a safe place and protect against moisture and fire. Some people have gone as far as engraving the private keys onto aluminum or other metal plates.
The safest way to create a bitcoin wallet would require a fresh OS install, e.g. a USB-launched Ubuntu, turned off internet connection and a printer that does not work via wi-fi. If you think that is an overkill you can simply go to one of bitcoin paper wallet generators online:
https://github.com/pointbiz/bitaddress.org (source for the first site, safest option. download zip and run bitaddress.html)
- save the web page to your computer (or a fresh OS install from live cd or thumb drive)
- turn off internet connection and
- open the saved HTML pages
Follow the instructions on them to create your paper wallets. Print or write down your private keys and save your public keys. That’s it, your saved private key is your Bitcoin Paper wallet, and you can load it by sending BTC to the public addresses.
A paper wallet containts 1-3 public addresses for receiving money and one private key for sending it. Once you decide to use the Bitcoin you’ve been holding in your paper wallet, just import (“sweep”) your private key into any electronic wallet (hardware, web, desktop) and use your coin.
- opt for wallets that let you control and back up private keys or mnemonic phrases
- use cold storage for savings (hardware wallets or offline computers with fresh OS installs)
- Understanding Private keys, how they are generated and how addresses are generated from them: https://bitzuma.com/posts/six-things-bitcoin-users-should-know-about-private-keys/
- Understanding Mnemonic Phrases: https://en.bitcoin.it/wiki/Mnemonic_phrase