How to choose a wallet for storing my Bitcoins?
Choosing a good wallet is the most important part of learning how to use bitcoin. Using a safe storage solution is not an easy task. In fact the most convenient wallet systems (web-wallets) are usually the most unsafe. Thankfully there are many extremely safe options for holding your bitcoins.
To keep things simple, just remember that the private keys of your wallet are (like a password) and is what enables sending the coins elsewhere. The safest storage solutions are those where the private keys are kept hidden away from the outside world to see.
Hardware wallets are the most secure way to store your Bitcoin or other Cryptocurrencies.
The link below provides steps on setting up and using the Ledger nano s to send payments.
Ledger Nano S
you can buy a ledger nano s direct from the supplier here;
Transfer your crypto assets from an exchange to take ownership of your crypto;
Trezor Hardware wallet
you can buy a trezor direct from the supplier here;
Cold Card wallet
Quick Start Guide;
you can buy a cold card wallet from the supplier here;
Cold Card + Wasabi wallet setup guide;
Open Dime Bitcoin Credit Stick
Hardware wallets are very sophisticated semi-cold storage (mostly offline) systems. A piece of hardware is used to store the private keys to your bitcoins. Every time you want to send coins then you’ll just connect the hardware wallet to a PC and then take it offline again once the transaction is complete. Keep in mind that you have to buy hardware wallets, unlike the other types of storage solutions which are mostly free. Although you still have to trust the hardware-wallet manufacturer & suppliers, many people claim that this is the safest type of bitcoin wallet.
Here are some popular hardware wallet systems:
- Ledger Nano S – Most popular hardware wallet, verification is done on the device.
- Trezor – Easy to use for beginners, nice user interface. More expensive than the Ledger Nano S.
- Keepkey – Limited range of coins supported although was recently bought by Shapeshift.
- ColdCard – It’s a Bitcoin hardware wallet, so it signs transactions and can be used offline.
Hardware wallet comparison;
Online web-wallets are websites or even online exchanges that allow storage. As I mentioned above, this is the least secure option as it usually involves leaving the management of your private keys to a web server. Web servers are prone to hacking, and users must also trust the online wallet operators. It is however a really convenient way to keep a couple dollars worth of bitcoin online for quick and easy payments. If you have large amounts, then never keep it all in a web-wallet.
Here are good web-wallets:
- Coinbase vault storage (for advanced users) – Extra safe multisig wallet with redundancy in case of website failure.
- Bitgo – focused exclusively on serving institutional clients.
A mobile or smartphone wallet is, as the name suggests, a bitcoin wallet on your smartphone. I love mobile wallets because it is really easy to scan QR codes with my phone’s camera to make quick payments to friends and merchants. Nomenclatures may vary, but I definitely consider mobile wallets to be as unsafe as web-wallets in terms of private key security. I say this because most mobile apps automatically update by themselves. If a hacker got access to the developer’s Itunes/GooglePlay account then they could potentially infect and steal millions of users wallets as their next update gets pushed through. Nevertheless, this type of wallet is great for having small amounts ready to pay.
Mobile wallets for iOS and Android are:
Desktop wallets are apps installed on a desktop computer or laptop. Many people store significant proportions of their bitcoins in desktop wallets as these are much safer than web or mobile wallets. If you asked me a few years ago, I would have said that this is the safest way to store bitcoins. Now, in 2017, with all the backdoor hacking stories, I would prefer using a variety of offline wallets (desktop, hardware, paper) to store my bitcoins. If you are comfortable with ensuring your PC’s security and/or using a Linux system (Windows is considered the least secure operating system) then this may be a relatively secure option for you. A desktop wallet could also be an option for keeping a certain percentage of your portfolio.
I really like these desktop wallets:
- Electrum – most popular desktop wallet because of simplicity. Users have to write down a seed when creating their wallet. Can be integrated with the Trezor or Ledger hardware wallets.
- Armory – a very secure and feature-laden desktop wallet for advanced users. Offline signing options make this extra secure. Note: this wallet requires BitcoinCore to function. Bitcoin Core is the original Bitcoin desktop wallet, but it needs to download the whole blockchain (>100GB large!) to work. I have not listed Bitcoin Core here for this reason.
Paper wallets are a secure offline storage, not recommended for beginners. With a paper wallet you only have to trust the wallet-creating software and the physical location that it will be stored in (usually a safe in a bank or at home). As with all super-secure solutions, this is the least convenient as you’ll need to create a new paper wallet every time that you want to send bitcoins somewhere. If you are planning to hold onto your cryptocurrency for a long time without spending it, a paper wallet could be a super-safe option for you.
Here are some trustworthy paper wallet systems:
- Coindesk has a guide for how to make a paper wallet
Most bitcoin wallets simply need one private key signature to make a transaction. Multi-signature wallets require multiple private key signatures to make a transaction. For example, if you wanted to send bitcoin you would first need to authorize the transaction, and then another trusted person would also need to authorize it. Neither you nor the other person can make a transaction on your own. Both parties require the other’s consent (signing) to make a transaction. This allows for some pretty advanced features and very safe storage solutions. This type of wallet is great for business using bitcoin.
Multi-signature capabilities are sometimes available in web, smartphone, desktop, and hardware wallets.
These wallets offer multi-sig capabilities:
- CarbonWallet, Coinbase, or Block.io (web-wallets)
- Blocktrail, CoinKite, Copay (mobile wallets)
- Casa Keymaster (mobile wallet)
- Electrum or Armory (desktop wallets)
Hot vs Cold Wallets
The terms “hot” and “cold” are used to describe the online connectivity of a bitcoin wallet, and by extension, its risk factor. Here is the difference between the two:
A hot wallet is constantly connected to the internet with the private keys loaded ready for use. For this reason a hot wallet is riskier because a hacker can theoretically access the private keys if they find a vulnerability. Sometimes I hear people use the term “online wallet” interchangeably with “hot wallet”. Hot wallets make it easy to do transactions quickly and on the go. Web, smartphone, and, to a certain extent, desktop wallets can all be considered “hot” wallets.
A cold wallet is not connected to the internet and the private keys are offline. Sometimes I hear people use the term “offline wallet” interchangeably with “cold wallet”. Cold wallets are therefore safer because hackers would have a very hard time accessing your private keys. Some cold wallet systems need to connect in order for transactions to be made. Others allow transactions to be signed completely offline and subsequently broadcast it to the bitcoin network (without connecting the private keys). Hardware (USB) and paper wallets are popular cold wallet systems.
The term “warm wallet” is occasionally used by experts when describing cold wallet systems that must connect to the internet to make transactions (most hardware wallets must do this). A warm wallet can be defined as a mix between a cold wallet and a hot wallet. Warm wallets are therefore not as safe as pure “cold” wallet systems, but they offer some conveniences of a “hot” wallet.
Thanks to @roponburgh from the Adelaide Bitcoin Slack group for this write up on how to store your Bitcoins. If you liked this and would like to send him a donation his addresses are below.
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