How to Select a Bitcoin Wallet: The Definitive Guide for Beginners
Previously we had mentioned about the various ways to secure a particular Cryptocurrency wallet. But what about the method of choosing the right Bitcoin wallet?
A Bitcoin wallet can be understood by the easy equation, Bitcoin address + Private key = Bitcoin Wallet.
In case you are among those who just look at a particular bitcoin wallet and choose it based on mere randomness, by neglecting or ignoring the common sense to see the various features that it withholds, then you are in great trouble.
What would happen if you choose a wrong or incorrect Bitcoin Wallet?
This is very dangerous because the main outcome by choosing an incorrect Bitcoin wallet is the loss of Bitcoins. Sometimes you would lose all the bitcoins all at once.
Most of the people tend to go with suggestions of a friend or a colleague who could be older and hence with a bit of experience. But it should be noted that crypto shouldn’t be based on experience because it is still a new field. So if a person tried to make you believe that he has more experience and hence would know better about the various wallets, then he is indeed wrong.
A wallet is among the most important asset since it contains both, private as well as public keys. Therefore, it shouldn’t be compromised at any cost because this would in turn, would once again make you lose your Bitcoins!
The Guide on How to select the best Bitcoin Wallet
So, with all the reasons on what would happen if you choose a wrong Bitcoin wallet, but what would be a good selection process to choose the best wallet and what is it based on?
There are various types of crypto wallets such as hardware wallets, desktop wallets, web wallets, mobile wallets, etc. But while selecting or choosing a good Bitcoin wallet, irrespective of the type of wallet, the following factors must be kept in mind –
- Ease of use – One of the main concerns regarding wallets, is the ability to use the elegant UI faster as well much easier.
- Back-up and security features – Back-up of the passwords, or security keys or PIN codes must be kept either online or offline with a lot of security features which could make a wallet more safe as well as reliable.
- KYC (Know Your Customer) – A wallet must never require a KYC for the obvious reason that the crypto world is decentralized.
- Control of Private Keys – A wallet is chosen based on the private keys in such a way that the person is able to own as well as control his private keys.
- HD wallet – HD stands for Hierarchical Deterministic. The HD wallets are basically those wallets which could generate public/private keys as well as new addresses by itself by using 12-word master seed keys.
- Developer Community – The wallet must be a part of an active development community for maintenance.
- Compatibility – The wallet must be compatible with various different OS (Operating Systems).
- Hot or Cold Wallet – A person must be aware if the wallet is hot or cold and hence choose the one that he actually requires or which could be useful for his company.
Purpose of Choosing a wallet
We had mentioned the various features upon which the bitcoin wallet has to be selected. But it must be noted that the purpose of choosing a particular wallet also matters. This tells the person or helps in showing the person, which of the wallet is in fact really required by a person.
Few of the purposes are as mentioned below-
- Daily Transactions – The daily transaction of the cryptocurrency could very well define a big purpose in selecting the bitcoin wallet.
- Long-term Savings – It is an obvious purpose that the bitcoin wallet must serve or be available for a long duration of time.
- Short term HODL – HODL basically means that their cryptocurrency is profitable one day. Hence a bitcoin wallet must be chosen in such a way that it is profitable in a short period of time.
- Daily Sell or Buy or Trading of Crypto – Most of the people somehow fail to realise the basic purpose of the cryptocurrencies, which is to buy, sell, or trade the coins. Hence, a person must realise which bitcoin wallet serves them right on a daily basis with regards to this important purpose.
Choosing between Hardware wallets and Software wallets
Now that the various purposes, as well as various factors, are mentioned, hence a person could choose his right bitcoin wallet.
These are few of the common crypto wallets used –
- Ledger Nano S– Hardware Wallet
- Trezor– Hardware Wallet
- Exodus– Desktop Wallet
- MetaMask– Desktop Wallet
- MyEtherWallet – Web Wallet
- Coinomi– Mobile Wallet
- Mycelium– Mobile Wallet
(You could click on the links above to use these wallets as well as find out their uses and features.)
Here is an overview of the various types of wallets –
As mentioned earlier, there are two main types of crypto or bitcoin wallets. One of them is known as the hardware wallet and the other one is known as the software wallet.
But what are hardware wallets and software wallets?
Hardware wallets – The wallets which satisfy each and every factor that was mentioned earlier, and which would have no contact with the internet directly, are known as hardware wallets. They are also termed as cold wallets since they have no internet contact (offline).
This kind of wallet is chosen for those who would want to save their savings for a longer duration of time, i.e. long term.
Another important factor is that they are examples of HD wallets and the addresses (public) cannot be reused.
Few examples include – Ledger Nano S and Trezor.
Software wallets – The wallets which satisfy each and every factor that was mentioned earlier, and which have some contact with the internet, are known as software wallets. They are also termed as hot wallets since they can store bitcoins which are connected online.
This kind of wallet is recommended for a shorter duration of time when a person has to HODL their bitcoins for say 2 or 3 months.
They could be desktop wallets or mobile wallets or web wallets, etc.
Desktop wallets are a better option to be selected when a person is connected to the internet as soon as he goes online and is required to be a hot wallet for just 2 or 3 months.
Examples for desktop wallets are Exodus, Bitcoin Core, Electrum, Jaxx’s chrome extension, etc.
Mobile wallets, as well as web wallets, are also used for storage of bitcoins for a shorter duration of time. The mobile wallet satisfies every factor or criteria that was mentioned earlier but the web wallets might not be able to satisfy a few of those factors or criteria.
Mobile wallets are very handy when a person requires bitcoins in any urgency or basically requires them on the go.
Examples of mobile wallets are Mycelium, Jaxx, Airbitz, Electrum, Coinomi, etc.
Web wallets, on the other hand, would be most required when a person has to do their KYC or when he doesn’t want to have a control of his private keys. These include a few In-built wallets, which are of centralized exchanges. (Like Bittrex, Binance).
These web wallets are basically in need when a person wants to conduct crypto trading on a daily basis. It involves a lot of risk though.
Examples for web wallets are Coinbase, Zebpay, etc.
The software wallets, even though they have good security as well as back up features, they still have many disadvantages like virus or malware risks, theft risks if stored for longer duration of time, etc.
Hence, it is recommended to opt for hardware wallets or hot wallets, whenever they are available for the particular cryptocurrency the person holds. This is purely because hardware wallets have very less probabilities of risk unlike software wallets or cold wallets, since it is very prone to hackers even though they might have great security or safety features.
There are a few dedicated platforms where a person can check survey on the wallet he is planning on using. These survey platforms must be put to great use if the person doesn’t want to fall prey to scams.
Another important factor to be considered while selecting a wallet is the multi-sig functionality factor. This factor is not available for all the wallets, but if you find a wallet with this feature, then you should definitely opt for it because, with this, your bitcoin wallet is made even more secure than the competitive bitcoin wallets.
Now that all the details about the various bitcoin wallets are mentioned along with the selection or choosing process, hence now it is up to the person to choose a bitcoin wallet according to their needs and purpose. But it can be noted that a person can have more than one bitcoin wallets if he has more than one purpose (multipurpose) for the bitcoin wallets.
Thus, the choice is purely up to the person but he must be aware of all the possibilities and risks in order to not lose his bitcoins and rather make good use of his bitcoin wallet.