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By Sarah Klein — Published June 17, 2018
Bitcoin is a digital currency, which means that unlike traditional currency, you aren't storing physical bills in a Bitcoin wallet. Instead, a Bitcoin wallet stores keys that allow you to utilize Bitcoins in a transaction. Each Bitcoin user has a public key and a private key. In order to make a transaction, you need to us a combination of the recipient's public key as well as your own private key.
A Bitcoin wallet is also known as a digital wallet. Bitcoin wallets are used to store your private key (or private keys) so that you can use and receive Bitcoin payments. There are many different types of Bitcoin wallets, each with their own benefits. Each type of Bitcoin wallet must conform to an established protocol so they an all be used in Bitcoin transactions, regardless of which type you choose. It's important that you get a secure, legitimate digital wallet because unfortunately scams do exist using fake wallets in order for criminals to gain access to your Bitcoins.
A paper Bitcoin wallet is a document that is often printed with QR-codes that can be easily and quickly scanned for transactions. You can get your own paper wallet by using a service such as Bitcoinpaperwallet.com. The main advantage of a paper wallet is that it is immune to hackers, but you need to take care that you store it safely, as you would with paper money.
A web wallet utilizes a server that can be accessed from your computer, smartphone, or any device with internet connection. Examples include Coinbase, Circle, Strongcoin, Xapo, and Blockchain. This option can be convenient, but keep in mind that the server is controlled by someone else who can access your private key (and money) if not trustworthy.
Mobile Bitcoin wallets are a good choice for those who use Bitcoins frequently in their day-to-day life. There are a number of different mobile apps for both iOS and Android that you can choose from, such as Bitcoin Wallet, Copay, Freewallet, and Jaxx. While this option is very convenient, the downside is that mobile wallets can be prone to hacker attacks.
A desktop Bitcoin wallet is downloaded onto your personal computer, meaning that you are storing your keys directly in your hard drive. Different options include Electrum, Exodus, and Armory. Desktop wallets are more secure than mobile- and web-based Bitcoin wallets.
Hardware Bitcoin wallets are the most secure way to store your private key. A hardware wallet is a physical device that is typically plugged into a computer by USB port. Some actually have screens for an extra layer of security. They are immune to viruses but are the only Bitcoin wallet option that is not free. Some choices include KeepKey, Ledger Nano S, and Trezor.
Which Bitcoin wallet is best will depend on your personal needs and how often you use Bitcoin as payment. Each option has its own pros and cons. If you want the safest, most secure way to store Bitcoins though, a hardware wallet is currently the best way to go. Whatever Bitcoin wallet you decide on, remember to guard it as much as you would a traditional wallet. Change any default passwords, and remember to make your password hard to guess: don't repeat passwords, and use a random combination of letters, numbers, and symbols instead of words or birthdays. If your wallet offers two-factor authentication, be certain to opt in for it. Finally, keep an eye on your transactions so that you'll be immediately aware should there be any unusual, suspicious activity.