How to choose the right Bitcoin wallet for you?


How to choose the right Bitcoin wallet for you?

So you just bought and your first Bitcoin and you are looking for a way to securely store them. To store coins you will need a Bitcoin wallet.

The basics

First you need to know the basics. What is a Bitcoin wallet?

A Bitcoin wallet is a software program where Bitcoins are stored. It is important to know that Bitcoins are not stored in a wallet. They are stored on the blockchain, a giant public ledger of every bitcoin transaction in history.

Wallet allows you to to store your coins using a private key and a public key (or an address). Think of your public key as your bank account (IBAN) number. It is fine to share it when sending or receiving a bitcoin.

Your private key is like a PIN number. You should never share it with anyone as that gives others access to your coins.

Wallets

Bitcoin wallets come in many forms:

  • desktop,
  • mobile,
  • web and
  • hardware.

You can find wallets to choose from here:

Bitcoin wallets

Which one to choose?

First you need to filter the wallets based on your device and operating system (OS).

Presented wallets mainly differ based on how they do validation. Bitcoin is designed as a decentralized peer-to-peer network. To validate and relay transactions Bitcoin must broadcast messages across network using “nodes”. Nodes are essential for confirming transactions and keeping the network secure. Every transaction is stored on a blockchain.

Full validation

Wallets that use full validation are considered the most secure. These wallets are full nodes that validate and relay transactions on the Bitcoin network. No third party is required when verifying payments. These wallets require downloading an entire blockchain which is currently around 150GB and they have a long synchronization time. For these reasons they are less practical.

Wallets that use full validation are:

  • Bitcoin Knots,
  • Bitcoin Core,
  • mSIGNA and Armory.

Simplified validation

Wallets that use simplified verification (SPV wallets) are also called thin or light wallets.

They do not require a complete copy of the blockchain rather they use an abridged version of the blockchain. These wallets cannot check whether the transactions are valid, rather, they can check if full nodes have validated them.

SPV wallets use random servers from a list that are connected to several nodes which have an entire blockchain. This means little trust in third parties is required when verifying payments. SPV wallets are considered good enough for an average user. If you want even more security you should consider full validation wallets.

SPV wallets are:

  • Electrum,
  • Bither,
  • GreenBits,
  • Bitcoin Wallet (mobile),
  • Simple Bitcoin and
  • breadwallet.

Centralized validation

Wallets that use centralized validation are considered the least secure.

These kinds of wallets rely on a centralized service by default. This means that a third party must be trusted to not hide or simulate payments. Wallets with centralized validation are:

  • GreenAddress,
  • ArcBit,
  • Mycelium,
  • Coin.Space and
  • BitGo.

When choosing a wallet you should consider what kind of user you are. For everyday or frequent use you should consider a secure web wallet. Private keys are stored by the service but in an encrypted way with your password. You also need to create a backup of your wallet, in order to be able to get access to the funds in case service provider for some reason becomes inaccessible.

Hardware wallets

For long term storage you should consider a hardware wallet.

A hardware wallet stores your private key in a secure hardware device. This is the most secure option as the private key is stored offline and is therefore immune to computer viruses that steal from software wallets.

Hardware wallets include:

  • KeepKey,
  • Ledger Nano S,
  • Trezor and
  • Digital Bitbox.

Hardware wallets

Important things to look for when choosing a wallet:

  • Choose a wallet where you control your private key.
  • Choose a wallet where you can protect your wallet with a password (private key encryption). If possible always enable two-factor authentication (2FA).
  • Choose a strong password and remember it (strong = long).
  • Backup your wallet. It allows you to recover your wallet if your mobile or computer gets stolen if you keep your wallet encrypted.
  • Do your own research and find if the wallet provider is considered respectable and safe in the community.
  • The least secure wallet is a web wallet with a centralized validation.
  • The most secure wallets are hardware wallets.
  • Do not keep your coins on exchanges. These are not considered wallets because you do not control your private key.

Always remember that no one is responsible for your coins but yourself. Stay safe!

Safety first

Tagged with: Bitcoin wallet security private key public key