What is Bitcoin?
Bitcoin is the most famous cryptocurrency in the world, and the first. Launched in 2009, it was the first decentralized currency and has been the flag bearer for the space ever since.
Bitcoin first came to the world’s attention through the Bitcoin whitepaper, published by an pseudonymous individual (or group of individuals) known as Satoshi Nakamoto. Bitcoin’s core aim was to create a digital currency that is as easy to use as regular online payments but that removes identity, allowing users to transact in privacy, free from the influence of third parties.
To achieve its aims, Bitcoin relies on the following:
- Blockchain: A public and decentralized ledger that enables the system to operate transparently, creating a trustless system that users can rely on
- Mining: A means by which the system self-authenticates transactions and adds them to the blockchain database.
Although Bitcoin wasn’t the first idea for a digital money that intersects the fields of cryptography and computer science, it was the first to tick the right boxes for investors and speculators by offering a reliable solution to the problem of trust between parties, which has resulted in the explosive growth we have witnessed over the years as its potential and popularity has grown.
Bitcoin has completely transformed digital finance. The disruption triggered by the advent of Bitcoin has had a far reaching impact, affecting all sectors of global commerce and even making headlines during global political crises.
What is a Bitcoin wallet?
A Bitcoin wallet is a software program or physical device that allows you to interact with your account on the Bitcoin blockchain. While it is sometimes compared with a physical wallet, the reality is that your coins aren’t actually stored on the device or software you are using.
A more accurate view of what your wallet does would be to think of your Bitcoin wallet as a sort of portal that connects you to your “private account” on the blockchain.
Your Bitcoin wallet connects to your blockchain account using a set of secret numbers, or private keys, that correspond to your blockchain account. Your private keys are used to access your account and approve transactions.
It is advised that you treat your private keys as you do your internet banking password because if a malicious actor gets their hands on them they can access your account and move your funds.
One of Bitcoin’s prized features is its pseudonymous nature, and while this is a valuable feature for carrying out transactions you don’t want to have tracked, hackers also benefit because it allows them to more easily get away with stolen funds. Once your funds are offloaded from your wallet, recovering them is next to impossible.
In this article we will be looking into the four main types of Bitcoin wallet that exist, their pros and cons, and examples of each to help you answer the question on the minds of many: which is the best wallet for Bitcoin?
What types of Bitcoin wallet are there?
Desktop wallets are designed to provide you with full control over your Bitcoin wallet on a PC, Mac or other such device. These wallets are connected to the internet whenever the device itself is, making it a ‘hot wallet’.
Mobile wallets are designed for the user who values mobility, for example those who like spending their crypto out and about. They carry the same security pros and cons as desktop wallets, although some wallets are more secure than others. Some mobile wallets make use of the ‘secure enclave’ that exists on a mobile device, which offers enhanced security.
A web wallet is designed to be used through a web browser. Many web wallets also offer mobile apps, but these are natively web applications whose apps are just a way to access the online wallet. Web wallets allow you to access your crypto from any device with a web browser, with the obvious benefits of flexibility and drawbacks of low security.
A hardware wallet is the best wallet for Bitcoin holders who plan to keep their coins for a long time. Hardware wallets (also known as ‘cold wallets’) are physical devices that have the private keys stored offline, making it near-impossible for hackers to obtain or intercept.
Although they come with a price (in some cases, a steep price), they are worth the investment if you have large Bitcoin holdings or if a very safe Bitcoin wallet is a priority for you.
What are the best Bitcoin wallets?
The Bitcoin Core wallet is a desktop wallet that is in many ways the foundation wallet of the Bitcoin network. It was created by Satoshi Nakamoto to serve as a dashboard for sending, receiving, and storing Bitcoin.
Although there are numerous wallets in which you can store or transact your Bitcoin today, the Bitcoin Core Wallet is more than just a medium for storage – it also acts as a “full node” in the Bitcoin Network. As a full node on the Bitcoin network, your Bitcoin Core wallet, together with the other nodes which make up the Bitcoin network, enable you to validate and relay Bitcoin transactions in a secure manner, helping the Bitcoin network be that little bit more secure.
Running a Bitcoin Core wallet therefore is more than just having a wallet – it’s also a way of helping maintain the integrity of the Bitcoin network.
The Bitcoin Core wallet has the following advantages:
- Full control over your Bitcoin funds – the keys are on the device you download to
- As a full node, you do not require transaction verification by third parties since you can verify your own transactions
- As an open source wallet, the Bitcoin Core offers full transparency
- The use of rotating addresses affords extra privacy
- You can use Tor to protect anonymity
However, there are also downsides to the Bitcoin Core wallet.
- It is a basic wallet so it has limited features
- Security limitations mean theft is easy on a compromised machine
- Since it is a full Bitcoin client, downloading it takes a lot of time and incurs large data costs (140GB+)
- It has high data capacity requirements – 500MB per day/15GB download capacity per month, and 5GB upload speed per day
- Not a great option for absolute beginners
The Bitcoin Core wallet allows you to do more than just hold your funds – it also makes you feel you’re helping the network. However, we suggest that the Bitcoin Core client is probably the best wallet for Bitcoin for those with a working knowledge of Bitcoin and blockchain, although of course there is nothing to stop a newcomer from exploring this wallet (providing they have the disk space and the data plan to support it).
Mycelium wallet is a mobile wallet, available on both iOS and Android, that allows you to send, receive, and store your bitcoin.
The Mycelium Wallet has been hailed for its speed and support for hardware wallets such as Ledger and Trezor. Its easy to use interface could make it an ideal choice for beginners and also experienced users who crave simplicity.
The Mycelium Wallet offers a variety of features that users will find useful, such as the interface protection feature which allows users to keep their private keys secure by entering a PIN.
The Mycelium wallet is a great choice for the following reasons:
- You can make transactions anywhere since the app is on your mobile phone
- Mycelium Wallet is tried and tested, with plenty of reviews to help you make an informed decision
- It supports multiple accounts
- It allows users to make offline transactions
- The software is open source, which means more transparency than most alternatives
- It supports hardware wallets like Trezor and Ledger
- It is easy to use
However, Mycelium also comes with some disadvantages:
- While easy to use, the Mycelium Wallet still has features that some might find overwhelming
- It is purely mobile, so users will not be able to access their accounts if they do not have their mobile device at hand
- It does not support all crypto exchanges
- It is susceptible to phishing and hacking attacks
If you want your crypto on a mobile device, the Mycelium Wallet may be the ideal choice for you. The chances are that mobile wallet users want a wallet that allows quick and easy transactions, which is what makes Mycelium Wallet one of the best mobile Bitcoin wallets.
Coinbase Wallet is a software wallet from exchange giant Coinbase that is available as a browser add-on and mobile device. Using this wallet, you can easily buy, sell, trade, or swap your bitcoin using the tools available on the Coinbase Exchange. However, the primary function of the Coinbase Wallet is to store your bitcoin, which is a good thing because Coinbase’s exchange fees are extortionate.
Coinbase Wallet is considered one of the safest options around out there since it is backed by Coinbase, a $35 billion dollar corporation which already makes heavy investments in security measures for its exchange.
Being a hot wallet, Coinbase Wallet stores your bitcoin online, and while this is unsafe compared to hardware wallets, there have been no significant hacks of the Coinbase platform so far.
Using the Coinbase wallet offers you the following benefits:
- Coinbase is a well-funded company, so you can expect updates and improvements to the wallet
- No need for KYC
- Available on various platforms
- Enhanced security features such as two-factor authentication
- Multi-signature access
- Easy to use
- Relatively safe Bitcoin wallet
The weaknesses of using Coinbase are as follows:
- Coinbase charges higher fees than its peers to exchange coins
- Coinbase has high KYC requirements if you want to connect to the exchange
- Hot wallets are still security risks
- Coinbase is not highly thought of in the crypto purist world
Coinbase Wallet is a good option for those looking for an easy and trusted way to store their crypto, but, as app review sites attest, users have experienced problems with the Coinbase Wallet on a variety of issues. It performs its key duties well, however.
Trezor One is a popular hardware wallet that stores your private keys in a safe offline environment. Hardware wallets like Trezor One offer the highest levels of security whilst offering the portability of a small and easy to carry device that can be easily plugged into a computer to transact.
Trezor One uses a limited USB connection to secure your Bitcoin even when the device is connected to your PC. By restricting the data being transmitted between the device and your computer to just your bitcoin transactions, it means that your private keys can remain safe even if the device is being used with a compromised machine. Its security and versatility make it one of the best wallets for Bitcoin (if not the best).
The Trezor One wallet has the following strengths:
- Hardware wallet, offering the highest level of safety
- Affordable when compared to other devices
- Easy to use
- Allows fiat-crypto purchases
- Native plugins with with many decentralized and centralized cryptocurrency platforms
- Compatible with desktops, laptops, and mobile devices
However, the downsides of the Trezor One are:
- Limited selection of cryptocurrencies that can be purchased with fiat
- Carries a price tag
- Converting crypto to fiat can be tricky
The Trezor One is the best Bitcoin wallet for investors who have large holdings and are concerned for the safety of their funds. Also note that the only downsides of the Trezor One Bitcoin wallet are related to issues that don’t concern the Bitcoin side of things, which is telling. This may be the best pick for you if you want a safe Bitcoin wallet.
The importance of storing your bitcoin in the right way has been demonstrated time and time again by those who don’t do it. The importance of having a reliable, and safe Bitcoin wallet cannot therefore be overstated, but it’s important to have a wallet that works for you.
Some investors have chosen to go for a two-pronged approach and have the majority of their holdings in a hardware wallet and a small amount in a mobile or web wallet for easy access. This means that all your Bitcoin eggs aren’t in one basket and allows you to make the most of the advantages of various Bitcoin wallets.
Hopefully this article has given you some food for thought on which is the best Bitcoin wallet (or wallets) for you. Happy (and safe) investing!