Buying and selling Bitcoin?
Then you’ll need a secure wallet to store them in. Bitcoin is the closest thing to digital cash to be invented yet, which means it’s physical possession that determines who owns it. Wallets come in many types that have pros and cons of security and convenience. In this guide, we’ll try to find the best Bitcoin wallet for your needs.
In layman’s terms, a Bitcoin wallet is like an account where you keep your cryptocurrency. Unlike a bank account that’s held at the bank for you, though, a Bitcoin wallet can be held by a Bitcoin exchange for you, or you can keep it at home on your own computer or another device.
What Is a Bitcoin Wallet?
A Bitcoin wallet is a software program that stores your claim to Bitcoins. Because Bitcoins are not physical objects, you don’t actually store Bitcoins themselves in a wallet. Rather, a wallet stores the private key that allows you to control Bitcoins and own them.
When you buy Bitcoins, what you send your wallet’s address to the seller, and when you sell Bitcoins, you sending your private key to someone else’s wallet address. Once the transactions are authenticated, the Bitcoins are added or deducted from your wallet.
Many online Bitcoin exchanges will provide a wallet for you to use to store Bitcoins between trades, but you can transfer Bitcoins from those online wallets to a private wallet on your own device. Because a wallet is really a software program, you can have a wallet on computers, mobile devices, and even specially made hardware devices that are used just for storing Bitcoins offline.
How to Setup a Bitcoin Wallet
Ready to get started with Bitcoin?
Then it’s time to get a wallet setup so you can store Bitcoins. Setting up a wallet is a matter of choosing a type of wallet and installing it.
Online wallets like those set up on CoinBase are a special case because they generally cannot be moved to another device like your home computer or a hardware wallet.
They are a good starting place, though, if you plan to buy your initial Bitcoins on one of the online exchanges. The exchanges will sometimes require you to do this, so they can hold your Bitcoins in your name until you decide to store them elsewhere.
What about setting up a wallet on a computer?
Setting up wallets on a desktop computer or mobile device involves downloading the wallet software like Electrum and installing it. Once it’s installed, you can follow the setup process used by each program. The common factor that all wallet programs will create is a public key that represents the address of your wallet.
This address, once it is in use, can be transferred to other wallet programs or to a hardware wallet. It is the unique identifier of your Bitcoin account. They’ll also create a private key that identifies you are the owner.
Then there are hardware wallets:
Hardware wallets usually resemble USB sticks and can be connected to a computer when you want to engage in a transaction. These wallets ship to you ready to be used, so you shouldn’t need to set up a wallet on them unless you intend to transfer an existing wallet you already own. Programs like Electrum are able to handle these kinds of situations.
All Wallet Types
How many kinds of Bitcoin wallets are there?
Very generally, there are hot wallets and cold wallets. Hot wallets are stored on network-connected devices like smartphones or desktop computers. Cold wallets are stored on offline devices like USB sticks or paper printouts.
We can also divide the plethora of Bitcoin wallets into five categories: Desktop wallets, mobile wallets, web wallets, hardware wallets, and paper wallets. We’ll cover some examples of each in this guide for the best bitcoin wallets.
Bitcoin Hardware Wallet
These are physical devices with software on them that manages the wallet. They are often USB sticks with two-factor security measures like confirmation buttons built into them. To conduct transactions, you plug them into a USB port.
When complete, you disconnect the stick to store it safely offline. Because there’s very little risk of hacking hardware wallets, they are considered the safest way to store Bitcoin. Examples of popular hardware wallets are Ledger Nano S, TREZOR, and KeepKey. Newer entries to the hardware wallet market are CoolWallet and BitLox.
Bitcoin Paper Wallet
A paper wallet is the simplest and least technical way to store Bitcoins. It is nothing more than a printout of the wallet’s public address and the private key that registers your ownership of Bitcoins.
This sheet of paper can then be folded, taped, and hidden in some secure place away from prying eyes. If you delete the software version of the wallet, then you’ve taken it completely offline.
Paper wallets can be created using software like Mycelium that prints scannable QR codes. This makes it possible to conduct transactions by scanning the paper wallet.
Ledger Bitcoin Wallet Review
Looking for a hardware wallet the community likes?
Ledger has been providing secure Bitcoin wallets for years, and its Ledger Nano S is one of the more popular wallets. Ledger has the functionality of other hardware wallets, giving you the security of storing Bitcoins offline. It adds to this with a PIN to protect against physical theft of the device. Three failed PIN entries causes it to wipe itself.
This is not the end of your Bitcoins as long as you have your recovery seed to get backups of the private key. The end result is a robust anti-theft mechanism. The Ledger Nano S is not the best option if you want to conduct secure transactions with it. Unlike the TREZOR, there’s some risk when connecting it to network-connected computers because it’s possible that malware could infect it.
- Good solution to the risk of physical loss
- Widely accepted by the Bitcoin community
- Not as secure as other options for online transactions
TREZOR Bitcoin Wallet Review
TREZOR is a Tamagotchi-sized device that’s highly rated for its flexibility. It can both store and spend Bitcoins securely because of a secure way of connecting to computers using a one-way USB port connection. This one-way connection prevents malware infections and is all that’s needed to make purchases since you just need to send data.
TREZOR doesn’t use username or passwords for user accounts, making them difficult to hack into. It also uses a confirmation button as a form of two-factor authentication for each transaction. Added to all of this is TREZOR’s Bitcoin community reputation as one of the preferred wallets on the market.
- Small, simple design is perfect for mobility and ease of use
- Can securely connect to computers without fear of malware
- Has the respect of the Bitcoin community
- The display screen can be hard to read
KeepKey Bitcoin Wallet Review
KeepKey is the hardware wallet for you. A newcomer to the hardware Bitcoin wallet market, KeepKey has an attractive design with a slick look and a large screen to display transaction details. KeepKey has built a good reputation in the time it has been on the market and has made its flexibility as a cryptocurrency wallet a selling point.
This wallet is a great choice if you’re interested in other cryptocurrencies besides Bitcoin, or if you want to trade cryptocurrencies. It supports storage of Bitcoin, Litecoin, Dogecoin, Namecoin, Testnet, Ethereum, and Dash. That’s made users of the lesser known alternative cryptocurrencies happy since they can use KeepKey to keep multiple alt-coins in cold storage with one device.
- Supports most of the emerging cryptocurrencies in addition to Bitcoin and Ethereum
- State of the art security features
- Slick design with a large display screen
- Newcomer to the hardware wallet market
Bitcoin Wallets for Windows
These wallets are managed by software that you install on your computer. They are intended to work with a computer with a network connection, making them examples of hot wallets. Hot wallets are considered less secure than cold, or offline, wallets since they can be accessed if someone hacks into your computer.
Some Bitcoin users disconnect the computer from any local networks to convert the wallet a cold storage. Electrum is a popular choice for Windows, Mac, and Linux. Other desktop wallet programs include Exodus, Bitcoin Core, Armory, and Copay.
Electrum is the choice of most Bitcoin users on a desktop computer. It supports Windows, Mac, and Linux operating systems and provides all the technical details any Bitcoin aficionado might want.
It doesn’t stress out the computer’s CPU either, so it will run well on older systems. It gets the respect it does from the community because of its advanced security and privacy features.
An Electrum wallet can be recovered with a pass phrase that retrieves backups from a remote server. In addition to these features, Electrum can interact with hardware wallets and function in an offline mode, so it can be put onto a computer without an internet connection.
- Well-known app with advanced features
- Can work in an offline mode for added security
- Not the most user-friendly application for newcomers to learn Bitcoin
Exodus has the flexibility to do that. Started up in the summer of 2016, Exodus has been working its way into the Bitcoin and larger cryptocurrency community with a versatile design that has the multi-cryptocurrency trader in mind.
It supports 11 cryptocurrencies so far and is sure to add more as they appear on the market. Exodus is also designed to work with ShapeShift, a cryptocurrency exchange that has itself been growing in popularity. Even though this app has all the features needed to manage an investment portfolio of cryptocurrencies, it’s simple design clearly has the newcomer to the market as its target.
Currently, Exodus is available for Windows, Mac OS, and Linux. Exodus collects low fees and spreads on cryptocurrency exchange prices that are typically 1-3%.
- Versatile with the cryptocurrency portfolio investor in mind
- Fully integrated with the ShapeShift exchange
- Low cost
- Not as well know in the community and still building acceptance
That would be Bitcoin Core. What is Bitcoin Core?
It’s the software the runs the Bitcoin transaction messaging network. In addition to those duties, it also includes a Bitcoin wallet that can be used by anyone. This secure wallet contributes to the decentralized network by validating transactions and storing copies of the blockchain.
Bitcoin Core works with Windows 7, 8, and 10, Mac OS X, Linux, and some of the ARM chips. It only works with Bitcoin, so if you’re looking to trade in other cryptocurrencies, there are other wallets that can handle all of them. It does provide one of the best suites of security features, including support for the Tor browser and use of a decentralized peer-to-peer network.
- The Bitcoin infrastructure software package
- Great security and privacy features
- Only stores Bitcoin
Armory is the open source choice in our round-up. Armory was one of the first desktop wallets to introduce cold storage capabilities as well as multi-signature support for greater security. Because Armory pioneered some of these advances in Bitcoin wallet security, it’s well-regarded by community members who are concerned with security.
If you need to fend off potential hacking attempts, Armory can give you some added confidence. The app works with Windows, Mac OS X, Linux, and Raspberry Pi. The wallet charges a transaction fee and only supports Bitcoin.
- Good reputation in the community
- Open source
- Pioneered advanced security features
- Only supports Bitcoin
- May be challenging for newcomers to learn
This app was developed by BitPay to secure its store of Bitcoins, but it has since emerged as a wallet that many businesses have adopted to accept Bitcoin payments. Copay gives its user near-total control of their assets. This versatility combined with a strong security and privacy system has made it a success in the Bitcoin community.
It supports multi-signature transactions, meaning that it can be shared by several Bitcoin users. This makes it a good solution for businesses to pool Bitcoin receipts into a single account. The app has been released for desktop operating systems and has both web and mobile apps versions as well. The wallet charges a small transaction fee when sending Bitcoins to another wallet.
All of this means Copay is the preferred wallet for businesses to accept Bitcoin payments from customers.
- Multi-signature support
- Released on desktop, web, and mobile platforms
- Open source
- Easy to learn
- Not a decentralized system
These are wallets are created and managed remotely on a web server. CoinBase, for example, has in the past provided a full wallet service to its traders. Most exchanges today manage your Bitcoins for you and give you access to them, so you can transfer them, but you don’t have access to the wallet’s public and private keys. Examples of standalone web wallets for Bitcoin are GreenAddress and BlockChain.info.
Blockchain.info has been in the business for a long time and learned some hard lessons about web wallet security. The site has had the misfortune of being the target of hacking attacks. Such security and technical problems have been part of the Bitcoin community’s growing pains, but it’s also marred Blockchain.info’s reputation.
Blockchain.info today has both a web wallet app and a mobile app, making it readily accessible. Two-factor authentication helps secure a user’s wallet credentials, and the mobile app makes use of a PIN for added security. The interface is easy to use, even if the servers have suffered from glitches and outages at times.
The Bitcoin community has largely moved on to better options, but Blockchain.info still holds the place of favored backup option among many veterans.
- Easy to use interface
- Both web app and mobile app wallets available
- Past security and reliability problems
Bitcoin Wallet Apps
These are wallets that are managed by mobile apps. In this case, you have the option of carrying the wallet with you everywhere you go. These are also hot wallets and can be hacked if your device is compromised.
However, if you turn off WiFi and cell service to the mobile device, you will have something close to an offline wallet. Mycelium, BreadWallet, Copay, Jaxx, AirBitz, and GreenBits are some of the Android apps that can setup and manage Bitcoin wallets.
Mycelium currently holds that title in sheer downloads. It’s an open source project by a maker of hardware, software, and security products for the Bitcoin community. The security suite is impressive and includes the option to use the app in a cold storage capacity. The interface is well-designed with the busy Bitcoin trader in mind, keeping the main functions front and center.
Mycelium also integrates with a peer-to-peer trading platform that helps you find a local trader to make deals with anonymously. This is best used for face-to-face transactions in cash since scams and fraud are rampant without identity verification.
This mobile app aims to advance the cause of Bitcoin as a movement, and the community has responded to that by supporting Mycelium.
- Good security features
- No transaction fees
- Local trading platform
- Only available on Android platform
- Local trading platform is prone to scams because of anonymity
Bitcoin Wallet for Android
With several million copies downloaded, the simply-named Bitcoin Wallet is one of the most popular Bitcoin wallet apps available on the Android platform. Bitcoin Wallet can store both Bitcoins and Bitcoin Cash. The app is designed for ease of use, and its developers have streamlined it after five major versions releases.
The company has a zero-trust policy built into its design, which means they aim for a decentralized architecture that gives users as much control over their Bitcoins as possible. Bitcoin Wallet excels at both security and transparency, making it a favored choice for storing Bitcoins on Android devices.
- Trusted player in the wallet business
- Strong security
- Not as easy to learn for new Bitcoin users as other apps
- Currently only available for Android and Blackberry devices
Coinbase Bitcoin Wallet
Then Coinbase may be for you. As many veteran Bitcoin users will say, Coinbase is not actually a Bitcoin wallet because it no longer gives you direct access to your private key.
However, Coinbase does have security in mind, offering Bitcoin vaults and multi-signature wallets to prevent the kinds of thefts that have occurred at other exchanges.
The vault can be used to put Bitcoin in cold storage and features a 48-hour delay for withdrawals, so you have plenty of time to review them before they are completed.
Another selling point is that fiat currency deposits at Coinbase are FDIC insured for users in the United States. Overall, Coinbase is a good place to begin buying and selling Bitcoin before graduating your own private wallet.
- Good security options including vault accounts
- Reputable investors make this a trustworthy exchange
- Easy to learn for those new to Bitcoin
- Not the same as a private wallet
What’s the Bitcoin Wallet with Lowest Fees?
Many wallet services have near zero transaction fees, but it’s difficult to find any that will not charge fees under any circumstances. Xapo Wallet, however, charges no transaction fees to transfer Bitcoins to another Xapo Wallet. This at least makes it possible to buy and sell Bitcoins at no cost, though you will be charged a small (less than 1%) fee for transactions with third-party wallets.
Xapo is a web wallet, so you’ll use a web browser to interact with it. The company has well-developed security and privacy features and supports debit card transactions. This makes it a good choice for using Bitcoins to make online purchases. It’s also user-friendly for new Bitcoin consumers.
- Debit card transactions are supported
- Low fee rates
- Online wallets are higher risk
What’s required to keep your Bitcoin wallet secure?
The least secure form of Bitcoin wallets is a web wallet that resides on a web server. This is for a couple of reasons.
The first is that web servers are notoriously easy to break into compared to other types of networked computers. Because by their nature, web servers must allow direct communication to and from other internet-connected computers. This makes them easy targets for hackers.
The second reason is that the organizations that manage the servers often can be compromised with phishing attacks and other types of social engineering. There have been major heists in recent years by hackers who have stolen large amounts of Bitcoin from Bitcoin exchanges.
This is why wise Bitcoin traders don’t store their Bitcoins on remote servers any longer than they need to.
The next level of security is to keep your Bitcoin wallet on a local computer. However, keeping any networked device 100% secure is still impossible today. Hackers have a variety of methods at their disposal to compromise your Bitcoin wallet at home, ranging from network vulnerability hacks to gaining physical access to the computer.
The primary means of theft is from a remote location, which requires an internet connection of some kind. For this reason, the only way to make your wallet almost 100% secure is to take it offline when you’re not using it.
So, how do you keep your Bitcoins safe?
Taking the device offline that stores your wallet gives you the best security possible. A computer that has had its network connections disabled is not quite as secure as a hardware wallet because the computer’s network connection can be turned back on.
Hardware wallets are the best form of security as far as electronic devices are concerned, but they are still exposed to some risk when you plug them into a USB port. It’s theoretically possible to infect them with malware if the computer they are plugged into is infected.
But there is another option:
The best form of a secure wallet is the paper wallet, simply because it is not an electronic device. It’s not possible to steal it’s data through a network connection, though it is vulnerable to prying eyes if unscrupulous people can access the paper printout.
What are the ways you can be scammed out of Bitcoins?
Scams can run the gamut from fraudulent website operators to reverse-engineered hardware wallets. Before using any online service that will store your Bitcoins, you should research the company operating the website and make sure it’s a legitimate business.
An example of this type of scam is the Mybtgwallet scam that took advantage of the stampede of new Bitcoin buyers in late 2017.
The site offered to transfer user’s existing Bitcoin private keys to new wallets they thought they were creating, but the website pocketed the Bitcoins instead of crediting them to the wallets. The site managed to collect over $3 million in Bitcoin and other cryptocurrencies before the ruse was uncovered.
Another similar type of scam is fake Bitcoin wallet apps. Programmers can create apps to steal your Bitcoins that appear to be legitimate to the security screens used by Apple and Google, and there have been many instances of fake apps hitting both platforms.
These apps will appear to function as Bitcoin wallets, but they’ll redirect your transfers to the fraudsters own wallets, or simply pocket any Bitcoins that you try to deposit into the fake wallet.
Can it get any worse?
Yes. Even hardware wallets are not immune to these kinds of switch-and-bait frauds. Some fraudsters will modify or pre-activate hardware wallets and sell them on third-party sites like eBay.
In one fraud, the seller of the hardware wallet keeps the recovery seed so they can take control of the wallet after Bitcoins have been deposited into it. It’s also possible that fraudsters could add malware to hardware wallets. For these reasons, you should never buy hardware wallets from third parties.
How Is Bitcoin Wallet Used?
Using a Bitcoin wallet is easy, but the procedure will vary from one Bitcoin wallet to the next depending on the software interface. The common denominator for all of them, though, is selecting the destination wallet’s address and entering the amount of Bitcoin to transfer.
If you are the seller, that’s all you need to do to send Bitcoins to another person through most wallets. You’ll, of course, want to make sure you receive payment first.
What about buying Bitcoin, you ask?
When you buy Bitcoin, this will often be a transaction that you pay for with a local currency and a traditional bank account. You provide the selling with your Bitcoin wallet’s address, so they can send the Bitcoins once they’ve received your payment.
What If I Lose a Bitcoin Wallet?
If a Bitcoin wallet is deleted from the device it’s stored on and no backup exists, whatever Bitcoin that it contained is lost along with the private key that registered them. It’s similar to burning paper cash. That instance of currency is destroyed. In the case of Bitcoins, what they are “made of” is the private keys that authenticate their owner, rather than printed paper.
How can you avoid losing your Bitcoins?
Like any other software or data, the way to avoid losing it to a hardware or software failure is to back it up. If you can restore a backup of your Bitcoin wallet file, you’ll be able to continue using it.
What is Bitcoin Wallet Private Key?
Bitcoin functions as a public network that publishes transactions between people who are buying and selling Bitcoins to each other. That network carries transaction messages between wallets that have unique addresses.
The way the network identifies each people is with a unique private key that authenticates the transactions that are sent and received by them. Essentially, each private key is a network ID of each person who owns and uses Bitcoins.
Each private key is an encrypted number. When you see a private key printed out, though, it doesn’t look like a number. Instead, it’s encoded into Wallet Import Format (WIF) to make it shorter. WIF encoding consists of a series of letters and numbers.
What happens if someone steals your private key?
Because your private key is used to authenticate the transactions you participate in, anyone who steals your private key has taken control of your Bitcoins. A thief will usually delete your copy of the key to make sure you can’t try to take it back.
Your private key is also the way the address of your wallet is created. The wallet’s address is a public key that’s calculated using the private key as the starting point, though it’s done in a way that’s irreversible. This public key then becomes the address for the destination of Bitcoins that you receive from someone else’s wallet.
Bitcoin Wallet vs Vault
A vault is a Bitcoin wallet that is kept under tight security measures to prevent the Bitcoins it stores from being accessed. Wallet providers like Xapo have Bitcoins vault services that place the owner’s vault on an offline server behind concrete walls and encircled with Faraday cages.
The server farm is placed inside high-security installations like a decommissioned military bunker to prevent physical theft. All of this is billed to mean vaults are 100% secure, although there is always the slight chance of insider fraud.
Bitcoin vaults are intended to be like long-term savings accounts because accessing them will require more time than a wallet. Some advocate storing most of your Bitcoin in a vault and keeping only the amount you expect to need for your short-term trading or purchases in a wallet. This safeguards most of your Bitcoins from the risk of loss.
Bitcoin Wallet Fees
Wallet fees usually take the form of a per-transaction percentage. Wallet providers will often charge no fees from transactions between their own wallets but charge a small percentage (typically less than 1%) for transactions with third-party wallets.
If you buy and sell Bitcoins on exchanges, they will typically collect larger fees for essentially the same service of moving Bitcoins between wallets or escrow accounts. Some wallet providers also charge for unconfirmed transactions and other situations, so it’s wise to read the fine print when choosing a wallet.
Reddit Users’ Opinions
Reddit Users prefer hardware wallets like TREZOR and KeepKey in tandem with desktop wallet software like Mycelium and Electrum if they want to store large quantities of Bitcoins.
Paper wallets are also mentioned by some, though the convenience and improved security of hardware wallets have converted the most security-conscious Bitcoin owners who had been paper wallet holdouts.
What happens when 21 million Bitcoins have been mined?
Bitcoin’s mathematical basis limits the number of coins that can be mined to 21 million. Once that many are in circulation, no more will be created. It’s possible that Bitcoin’s algorithm could be changed to increase the number that can be mined before that happens. If it isn’t and demand continues to grow for Bitcoins, then supply and demand will drive Bitcoin values higher.
Can other cryptocurrencies besides Bitcoin be stored in Bitcoin wallets?
Some wallets that support Bitcoin can store other types of cryptocurrencies, too. KeepKey, for example, can handle Bitcoin, Litecoin, Dogecoin, Namecoin, Testnet, Ethereum, and Dash. If you’re interested in owning other cryptocurrencies besides Bitcoin, you’ll want to research all the possibilities before settling on a particular wallet.
Can I transfer Bitcoins to my bank account?
No, currently traditional banks do not recognize Bitcoin as a currency that they can accept. Transferring Bitcoin to a bank account in exchanges like Coinbase is actually a conversion of Bitcoins to a local currency (i.e., selling the Bitcoins to the exchange).
Is it legal to own Bitcoins?
Bitcoins are still a legal grey area in many countries. You will need to research your local laws and the opinions that have been reached by regulators and law enforcement before engaging in Bitcoin trading. In many parts of the world, it may be construed as acting as a currency changer and require licensing or permits. In some countries, there are efforts to ban Bitcoins altogether.
Are Bitcoins legal in the United States?
It’s legal to use Bitcoins for financial transactions in the United States, and the same taxes and fees apply that do when using USD.
There you have it, the best Bitcoin wallets reviewed and explained. There are many varieties and options to explore. Which of them is right for you will depend on the amount of Bitcoin you plan to store and trade, and whether you want to use Bitcoins for day-to-day purchases or as an investment. It will also depend on the security risks you’re willing to take.