What is a Bitcoin Wallet?
A Bitcoin wallet lets you receive Bitcoins, send Bitcoins to other people and store them safely.
What are the main types of Bitcoin wallets?
The two main types are a hot Bitcoin wallet and a cold Bitcoin wallet.
Hot Bitcoin wallets
Hot Bitcoin wallets are installed on your computer, mobile phone or a remote server. Hot wallets are very easy to use on a daily basis, and most people use this type of wallet. However the main disadvantage of a hot wallet is the fact that it is connected to the internet. That means that your coins are also accessible to hackers.
Cold Bitcoin wallets
Cold wallets maintain a high level of security because they store your coins offline. The original cold wallet was simply a cold paper wallet with private keys printed on It. Paper wallets are less common today.
Nowadays most hardware Bitcoin wallets are physical devices, designed to secure bitcoins. This is done by storing the wallet private keys on the hardware device itself.
Hardware Bitcoin wallets have some major advantages over software wallets:
– private keys are often stored in a protected area and cannot be transferred out of the device in plaintext.
– Hardware wallets are considered immune to computer viruses.
– Hardware wallets are easier to use than a cold paper wallet which must be imported to a software wallet at some point.
– Hardware wallets allow the user to validate sending coins of the device itself. That means that you have to have physical access to the wallet to still the coins.
Custodial vs. Non-Custodial wallets
When using a non-custodial wallet you are the only owner of the private key (seed phrase) and no one else can get access to it.
When using a custodial wallet you have a partner that can access your private key, usually another company.
What kind of Bitcoin wallet is the best for me?
If you are making payments in person, you will prefer a mobile wallet. Here is a list of iOS & Android wallets.
If you are making payments frequently but not in person you may prefer to keep your funds on a desktop wallet. Here is a list of desktop wallets.
If you are interested in availability you can choose an online Bitcoin wallet that will allow you to access your bitcoins from any internet connected device.
If you are dealing with very large amounts of Bitcoin you will need a very secure wallet. In that case you must use a hardware wallet to store your coins offline.
You can also combine those wallets: store large amounts on the hardware wallet and small amounts on the mobile wallet when you need to use them. Think of your hardware wallet as your savings account and your mobile wallet as your checking account.