Choosing the right bitcoin wallet plays a significant role in keeping your bitcoins secure. Far too many people are lax about their bitcoins, yet they cry foul when they lose them.
It’s not just enough to go by the recommendations of a friend, who has little or no in-depth knowledge about cryptos. You need information from folks who know what they are saying.
Let’s think about it this way: when it comes to personal security, whose advice would you take? A security expert’s or a friend’s whose idea of security is limited to the locks on their doors?
We’re guessing the former, right? The same goes for bitcoin wallets. It’s easy to just pick one and be done with it. But ask those who have lost tens of thousands of dollars to their nonchalance, and you’ll see that they regretted that decision.
With that out of the way, let’s get started on helping you get the best bitcoin wallets for your situation. For starters, there are different bitcoin wallets for different situations. Most people assume there’s a one size fits all bitcoin wallet –and maybe there is.
But, you need to think of storing your bitcoins in the same manner as you think of your traditional cash: some in the wallet, some in your regular bank accounts, some in your savings account, and/or some in your investment/retirement accounts.
You wouldn’t go around lugging all your cash around, would you? That’s the same approach you need to take. If you do take this approach to storing your bitcoins, you will find that your bitcoins will remain safe and secure.
Types Of Bitcoin Wallets
Now that you know this, let’s talk about the main types of bitcoin wallets:
- Hardware wallet
- Mobile wallet
- Desktop wallet
- Web wallet
All of these wallets serve as a place to store your bitcoins. Of course, you don’t have to use all of them at once. Most people typically opt for two wallets as that’s often enough. There are various product types for each of these wallets, most of which are made by different vendors.
Which means some of them may be lacking in certain features. To make sure that they meet the minimum standard, ensure that they have the following features:
- No need for KYC processes –the whole purpose of using cryptos is to ensure anonymity. No one needs to know who you are or what you do
- User friendly user interface
- Cross platform compatibility –should be compatible with the popular operating systems
- Private keys
- Security features
- Backup options
- Developer community to ensure continuity and support
- Clear distinction between cold and hot wallet
Also, make sure that your bitcoins are stored in wallets based on your goals. For instance, moving your bitcoins to a cold wallet when you intend to trade with it isn’t smart. That needs to stay on an easily accessible hot wallet.
Bitcoins you want to use as a store of value stays in cold wallet aka hardware wallet, where it’s safe, encrypted and inaccessible by criminals. Again, remember the comparison with your fiat currency. Walk around money stays in the wallet, other money goes in the bank account etc.
To help make this easier, here’s a quick summary of the functions of each wallet type.
Bitcoin Hardware Wallet
A bitcoin hardware wallet is a cold storage wallet that’s usually in the form of a USB drive or an external storage device. This is usually disconnected from the internet, and primarily used for storing bitcoins that you want to hold for a long time.
So, if you want to keep your bitcoins for a year at least, this is where you need to store your bitcoin. It’s the safest and most secure storage method, and protects your bitcoins from being accessed by hackers or malware.
You can only lose your bitcoins in the event of a hardware theft, loss or personal kidnapping where you’re forced to give the miscreants your private keys and passwords. The most popular hardware wallets in the market are Trezor and Ledger Nano S.
Bitcoin Mobile Wallet
Mobile wallets typically contain smaller amounts of your bitcoins, and are used for daily or frequent transactions. As a rule, do not store large amounts of your cryptos on your mobile wallets.
With these wallets, it’s pretty easy to do some business on the go. While they are relatively safe, they can be prone to losses considering that they are often on your mobile devices. So, if they get stolen or you lose them, chances are you wouldn’t be able to retrieve those bitcoins back.
The smart thing therefore, is to keep your mobile devices safe at all times. Some of the more popular mobile wallets that meet most, if not all, our above listed criteria are Coinomi, Jaxx, Airbitz, Mycelium, and the android based Electrum.
Bitcoin Web Wallets
Web wallets are the common web based wallets that you use for daily and frequent trading activities on the exchanges. They aren’t ideal for medium to long term storage.
These are frequently provided by the exchange platforms to make it easy for you to trade and exchange cryptos. You’ll find these web wallets on exchange platforms like Coinbase, Binance, Gate.io, Bittrex, and Zebpay among others.
These aren’t usually as safe as your hardware or desktop safe seeing as hackers tend to target these platforms. The good news though, is that these platforms have very security measures in place.
We do recommend however, that you use very strong alphanumeric passwords, as well as enable two factor authentication (2FA) on the platform. This way, even if the hackers guess your password, they won’t be able to access the account.
Bitcoin Desktop Wallets
Desktop wallets are best for storing your bitcoins on a medium term basis. Ideally, this will be on your computer, but completely shielded from your internet access.
As with the mobile and web wallets, these wallets are called hot wallets because they are on devices that are connected to the internet. However with security measures like PIN codes, and back seed, it can be difficult to hack.
The best way to completely insulate it from the internet is to install it on a virtual machine like VMWare where it is completely isolated from other parts of the PC. Some of the best bitcoin desktop wallets are Bitcoin Core, Exodus, and Electrum
Remember that you’ll need to consistently update your PC’s antivirus, firewall, antispyware, antimalware and every other app that will keep your computer safe and secure.