Since time immemorial, people have been keeping their money and valuables in safe places. Be they purses, clay pots full of coins buried in the backyard, or treasure chests hidden in caves with piles of bones strewn around to keep unwanted visitors at bay, the means conceived for safekeeping valuables are just as creative as they are limitless.
The advent of cryptocurrency as a new class of valuables and assets instantly spawned the need to keep them safe from the clammy hands of criminals. The logical solution was to develop wallets to keep them safe. As a result, a multitude of wallets have emerged, offering all kinds of added services to users while remaining a means of storage at heart.
There is a huge variety of wallets available: Coinomi, GreenAddress, Blockchain.info, Atomic, Exodus, Jaxx, Electrum, Copay, Bread, Airbitz, Armory, Mycelium, Blockchain Wallet and dozens of others, each offering their services to suit any taste.
Types of Wallets
In general, there are only two kinds of wallets – hot and cold. Hot wallets store user funds online, while cold ones store them offline. There are several types of wallets available, and everyone must decide for themselves which one suits their needs best.
Main Pros and Cons
When looking at wallets and their main advantages and disadvantages, the most obvious differences come from the division between hot and cold wallets.
In terms of cold wallets, such as the Trezor Bitcoin wallet or Ledger Nano S or X, there’s one main problem: that they can be physically lost. Even though anyone who ever finds them will never be able to gain access to the stored crypto without the private keys, the loss of all crypto on the device is guaranteed. In addition, cold wallets can be difficult to install and are inconvenient for frequent use.
Hot wallets are far more susceptible to risk than their cold counterparts. Though hot storage is much faster and convenient, with a wide variety of options from Coinbase to Blockchain.info, the risk of cybercrime runs high. Mobile or desktop storage is also considered hot storage and is also risky if the device is damaged or destroyed.
Now let’s consider the main types of wallets in detail and examine their pros and cons.
Hardware wallets: These are the most secure and reliable wallets available, since they are not connected to the internet at all. Hardware wallets are like flash memory cards that store the user’s cryptocurrency offline. A shining example is the Trezor wallet, which has been deemed impermeable for hackers. Unless the user loses the device itself or it is destroyed, it is safe to assume that the crypto will stay on it indefinitely and no unauthorized person will ever gain access to them.
Online, Web, or Hot wallets: These are online services or wallets that offer to store the user’s crypto online and can be directly accessed via the internet at any time. In essence, online wallets are online accounts in which users store funds. The risks are very high, since exchange wallets are routinely hacked and the crypto within stolen.
Desktop wallets: Desktop wallets are software programs that can be downloaded and installed on a PC and can only be accessed from the device they were downloaded onto. The risks are the same as with hot wallets, and another added inconvenience is that the loss of the device or the loss of access to it means the loss of all the crypto stored on it.
Mobile wallets: Mobile wallets are software programs that can be downloaded onto a mobile device, such as a phone or a tablet. There are wallets for Android and iPhones, and all of them bear even greater risks than hot wallets. Since mobile devices are susceptible to theft and a variety of viruses, it is extremely risky to store crypto on them. Though access to the actual crypto funds without a private key is impossible, the loss of all crypto on the mobile device is guaranteed if the device is lost or otherwise compromised.
Paper wallets: Paper wallets are offline cold storage for cryptocurrency. They are by far the safest means of storing crypto and include printing the public and private keys on a piece of paper and storing it in a safe place. The keys are printed in the form of QR codes for convenience. With paper wallets, the user has complete control over their funds, and the only risk lies in losing the piece of paper with the keys.
Other types of wallets: Apart from the five main types of wallets, there have been attempts to create other types of services, such as atomic wallets using atomic swap technology and even combinations of mobile/hot/cold wallets. Hybrid models have enjoyed limited success but have not become popular.
Bitcoin, as the first-ever cryptocurrency, was born with a number of defects. One of the main problems of the king of crypto is the yet unsolved scalability problem, which refers to the limit on the number of transactions the Bitcoin network can process due to the limited size and frequency of blocks in the Bitcoin blockchain.
This problem poses difficulties to all Bitcoin users and leads to what is known as backlog in the blockchain. This backlog leads to long queues for the transactions in the system. With an average transaction time of around seven transactions per second and the theoretical maximum standing at 27, it is not difficult to understand how long users of the Bitcoin blockchain have to wait for their transactions to pass in times of heightened demand – it can take hours and sometimes even days.
Bitcoin Wallets Review
Since Bitcoin is the most popular cryptocurrency on the market, it is logical to judge wallets by their support of this cryptocurrency. As such, the following is a brief review of some of the best and most popular Bitcoin wallets on the market.
Online Bitcoin Wallets
Online or web wallets are the most popular ones out there, and the best Bitcoin wallet overall is widely considered to be Blockchain.info, which is easily accessible and convenient for everyday use with good security. As an anonymous Bitcoin wallet, Coinbase follows as a close second with its ability to store a multitude of various coins but with the same security risks that are inherent to all hot wallets.
Android Bitcoin Wallets
Android is the most popular mobile system in the world and plays host to a number of good mobile wallets. The best Android Bitcoin wallet is widely considered to be the Electrum Bitcoin wallet, with its excellent reputation, good security, and convenience. Though Electrum experiences occasional glitches, they are never critical. Another excellent wallet for Android is the Coinomi wallet, with support for a wide variety of crypto and excellent user support, which even offers restore options using special phrases. However, Coinomi has its issues as well, such as occasional exchange glitches, but the many pros outweigh the cons.
Bitcoin Hardware Wallets
The undisputed leaders as the best hardware wallets for Bitcoin are Ledger Nano X and S, Trezor T and Trezor One, and Keepkey. Bitcoin hardware wallets are comparable in their security, accessibility, and usability. The difference is mainly in the price, which ranges from $165 for Trezor T to $59 for the Ledger Nano S model. In fact, the Ledger Bitcoin wallet is often called the king of hardware wallets. The KeepKey Bitcoin wallet is in the top three hardware wallets as a convenient and stylish device. Though KeepKey supports over 40 assets, it still lacks coin support.
iPhone Bitcoin Wallets
iPhone’s iOS system is the second-most popular operating system for mobile devices in the world and supports some good wallets as well. The best iOS Bitcoin wallet for the iPhone is considered to be the Abra software, which offers credit card support to top up crypto balances and a good user interface that is highly oriented toward exchanges. The next-best software is Edge, formerly known as Airbitz. The Edge wallet is best known for its high security and good user-friendliness, along with its multi-currency support.
Bitcoin Paper Wallets
Since storing crypto online on exchanges or in hot wallets or even on devices is risky, it is oftentimes more convenient to use a simple printer to print out the keys and store them. BitAddress offers a convenient, easy-to-use, step-by-step guide to creating a paper wallet that features the added benefit of sleeping in peace knowing that nothing and no one will ever threaten your Bitcoins.
Windows Bitcoin Wallets
Bitcoin wallets for computers are widely popular, and Windows is leading the way with some excellent offers. Atomic is by far the most advanced and best option for Windows users, as it offers Atomic swaps technology as its basis. The application offers a wide variety of operations and supports over 300 cryptocurrencies. Exodus is the second-most popular choice of a desktop-only wallet, with support for Bitcoin and many other altcoins. Exodus offers users a good interface and is free to use.
Mac Bitcoin Wallets
Since Atomic and Exodus are cross-platform wallets, they can be used on Windows and Mac. Apart from them, there are also Jaxx and Electrum, which can be used on Mac only. Jaxx is a multi-currency wallet with support for around 40 cryptocurrencies and contains a PIN feature. In addition, it’s free to use. Electrum is one of the oldest desktop wallets and is a lightweight wallet that does not require the full blockchain to operate, meaning it requires less storage for its operation. The wallet requires a PIN and is essentially a desktop bank with good security and usability. Electrum is also a Bitcoin wallet for the iPad, since it can be used on mobile platforms.
When embarking on the journey of creating your first wallet, consider carefully which type to use. The type will depend on your priorities and the amount of crypto you need to store. If security is paramount, then paper or cold storage wallets are the go-to solution. If frequency of use is the aim, then hot wallets and their inherent risks are the best way to go.
The most frequent questions related to wallets are how to set up a Bitcoin wallet and how to add money to a Bitcoin wallet. Both questions have no single answer, as each wallet has its own instructions on how to set them up and how to top up your balance. Therefore, it is recommended that you study all instructions carefully prior to operation.
Either way, there is no silver bullet when it comes to Bitcoin wallets, and you’ll have to sacrifice some features when deciding how to store your cryptocurrency. The one thing that is constant is the need to store Bitcoins and other crypto safely and make use of them.