What are the Different Bitcoin Wallets One Can Choose From
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
A Bitcoin wallet is a bank account for transacting in crypto-currencies. Without a Bitcoin wallet, you cannot send or receive Bitcoin payments. Therefore, before you get bitcoins, you will need to buy, download, or create a Bitcoin wallet.
The Bitcoin wallet is a combination of public and private key technology. The public key indicates the amount payable/receivable and the private key tied with the public key establishes the ownership. There are many different types of Bitcoin wallets but the wallets can be divided into two main categories; Hot Wallet and Cold Storage Wallet.
Hot Wallet v/s Cold Storage Wallet
A Hot Wallet in Bitcoin parlance indicates online storage wallet. Hot storage wallets are accessible from any web portal. These wallets are not recommended as they are susceptible to hacking. A cold storage wallet, on the other hand, is stored offline and is not accessible to hackers.
Here are the four different types of Bitcoin wallets that you need to know about: -
Software wallets require applications to be downloaded on a computer to create and access a Bitcoin wallet. Software clients are available for both desktop and mobile platforms. Some desktop clients such as Bitcoin Core require the entire Blockchain to be downloaded onto the computer, and run into sizes upwards of 100 GB. However, MultiBit is a lighter software wallet which does not require the Blockchain to be downloaded.
Among mobile-based software clients, MyCelium offers a robust software wallet for Android and iOS platforms. There’s also Copay offers mobile as well as desktop online wallets.
Note: Software wallets are only as secure as the computer/mobile they are stored on. It isn’t impossible for a malware to steal information. And desktop based software require technical know-how before you can operate them.
Online wallets are the easiest to use among all different types of Hot Wallets. Creating an online wallet is as simple as signing up for a new account on BlockChain. This wallet can be accessed from any computing device connected to the Internet.
Note: Your private key is stored on another server when using the online wallet. This makes online wallets vulnerable to theft. For instance, back in 2014, hackers stole Bitcoins worth $460 million from Mt. Gox, a popular Bitcoin exchange site. Online wallets hence should be used only for small, everyday transactions.
Paper wallet is a fancy name for printing your public and private key on a piece of paper. Paper wallets are highly secure as they are offline and is in your physical custody.
Most online/software wallet services allow you to print your existing wallet keys. In case your wallet does not allow, go to BitAddress and print the public private key combination.
Note: Make sure you have multiple copies of your paper wallet and keep them in a secure location.
Hardware wallets are cold storage wallets that generate keys on demand while making transactions. These USB shaped devices need to be plugged into your computing device while transacting.
Hardware wallets are secure from computer malware since they are offline and generate the keys on the device. Extremely convenient to use, hardware wallets do not require technical knowhow to operate. They have sturdy backup options so that you do not lose access to your wallet. They can also be secured with a password to combat theft.
Note: If you deal in Bitcoins regularly, invest in Hardware wallets such as TREZOR or Ledger Wallet. Ultimately, the safety and security of your Bitcoins is your responsibility. Hence, choose your wallet after carefully weighing your options.