As the name suggests, a Bitcoin wallet is a software and hardware used to store Bitcoins. This facilitates the user to send and receive Bitcoin and ownership of the balance. Technically, Bitcoin cannot be stored anywhere, hence every Bitcoin address has a secret code that helps the user to track it in his/her wallet.
Why do you need a wallet?
A Bitcoin wallet is a digitized wallet and is crucial to obtain Bitcoin and other cryptocurrencies. Just as Bitcoin is the digital, decentralized, version of cash, the wallet is analogous to a physical wallet. It is crucial to store the important information like the secret key to access the Bitcoin address and carry out transactions.
The four main types of wallets include:
- Desktop Wallets: They are installed on the desktop computer and gives the user complete control over their transactions. They enable the user to create addresses to send and receive Bitcoin and also helps to store their private key. The popular desktop wallets include MultiBit, Bitcoin Core, Armory, Electrum etc.
- Mobile Wallets: They are used to overcome the difficulties with desktop wallets as the latter has to be fixed in one place. The app on your phone helps to make payments from any location using the “touch to pay” by NFC scanning a QR code. Bitcoin Wallet, Mycelium Bitcoin Wallet are the popular mobile wallets used today.
- Web Wallets: Allow you use to access your Bitcoin from anywhere, on the browser or on the phone using an internet connection. However, the only safety concern is that private keys will be saved online. Blockchain and SpectroCoin are popular web wallets.
- Hardware Wallets: They help to store your Bitcoin offline and thereby provide high levels of security to prevent fraudulent use of your coins by hackers. It uses private keys electronically and facilitates payments. The two most popular hardware wallets in play today are Ledger Nano S and TREZOR.
- Cold Storage: It is an offline wallet provided to store Bitcoins. Using cold storage, one can store their digital wallet on a platform not supported by the internet, thereby safeguarding it from malicious use such as hacking, theft and other vulnerabilities that the system is prone to suffer. The advantage with cold storage is that it provides a secure storage place for the Bitcoins in the event of a cryptocurrency account or wallet being compromised.
Bitcoin wallets to choose from
It is not just a wallet to choose from but also a major Bitcoin client and has huge prominence in the industry. Bitcoin Core is a desktop app on the official Bitcoin website, bitcoin.org. The sole purpose is to send and receive money in the wallet and does not offer buying and selling. The key feature is the high-end security and encryption facilitated by the app which uses a private key for every transaction. Any fraudulent intentions cannot harm the money stored thereby making it a very popular choice. Adding to this is the simplistic and detailed structure of all your invoices. However this being said, Bitcoin Core is significantly larger and resource-consuming than any other wallet.
Mycelium is one of the most popular android wallets due to its great functionality and high-grade security. It is a Hierarchical Deterministic Bitcoin wallet, which means that it uses a master ‘seed’ to obtain all future Bitcoin addresses. It is an app that requires less maintenance and one can get easily accustomed to its features. Adding a new wallet or importing a wallet is made simple on their interface.
The feature that sets it apart from the rest is that a user can exchange Bitcoin with another user through a decentralized system under their Local Trader function. Funds are directly transferred between users without the involvement of a third party and highly encrypted chat tools is an added bonus to discuss details.
Any transactions queued without an internet connection will be made when it is reconnected.
mSIGNA Bitcoin wallet
Another option for Bitcoin users, this wallet offers many unique features to its users. A standout feature is the use of ‘Vault files’ which are encrypted files using .vault extension designed by the firm to safeguard user credentials and money. Vault files contain all data including account history, transactions, and keychains which makes it hassle-free. With encrypted electronic and paper backup, they have a good package of speed and advanced features. Despite all the security, Vault files are still highly susceptible to outside hacking since all data is stored in one place.
Electrum Bitcoin wallet
It is the most widely considered option for Bitcoin wallet and it comes as a part of the Tails OS. Usage without the OS is not recommended as it gives away personal information to a centralized server. It also helps you to set up a strong encryption system quickly and upon installation, they provide a 12 worded code which you can use to retrieve your Bitcoin on the account of an external problem. Electrum is a lightweight wallet and connects to external servers used by other Electrum clients. This setup helps it to sync faster. However, it is less private than Bitcoin Core and Armory. Electrum can also be used to create secure offline cold storage.
How to create a Bitcoin Wallet
- Download the desired wallet (or buy a hardware wallet) and choose its appropriate version based on your current OS.
- Once the download is complete, you will see an installation wizard that will continue the installation process.
- Once the installation is complete, the application will start up and on accepting “Yes“ for the terms and conditions provided, you will gain access to the application.
- Open your account on the installation and you can gain access to your transactions.
There are several things to keep in mind while using Bitcoin, primarily to always maintain multiple Bitcoin wallets for different things and while transferring Bitcoin from one wallet to another, tumbling Bitcoins is extremely mandatory.