First, the internet revolution made our mail boxes obsolete to the point to which millennials don’t even know how to send letters anymore. Now, the same thing is happening to our money, hence to our wallets. This page will help our readers keep up with Bitcoin wallet technology. So before you set up a Bitcoin wallet, here is a short guide of what it is, how it works and how to keep it safe from cyber criminals.
A Bitcoin wallet is, like the name says, a place to put your Bitcoins.
The peculiarity of these wallets is that unlike a physical wallet that holds your credit cards and cash, Bitcoin wallets behave more like bank accounts than wallets. There are basically two kinds of wallets: the software wallet, which you set up on your computer or mobile device, and the web wallet which is hosted by a third party. The software based wallet may not be as straight forward to install and maintain, although it allows you to keep complete control over the security of your coins. The web based wallet is easier to use but requires you to trust the third party keeping your coins in their cyber vault.
What are the Risks?
There are inherent risks in using Bitcoin wallets, especially when these are connected to the internet. That is why many of these wallets can store your coins offline and go online only when you want to make a transaction. This is the basis of the distinction between a hot (online) wallet and a cold (offline) wallet. Bitcoin transfers can be made using cold or hot wallets.
To understand how this works, it is necessary to take a step back and understand what a single coin is made of. A Bitcoin is composed of two parts: a public address and a matching private key or code. Each of these couples have a unique identity. Possession of a given Bitcoin is determined by matching the public address to its specific private key. The public address and the private key or code are basically lines of data that should match uniquely.
Your wallet will essentially contain the private keys, so as long as those are in your possession, the coins are yours. This is why cold storage is so important. Keeping those keys hot, or online at all times, could be tantamount to walking down the street with a pile of cash in your hand. When you are ready to make a transaction, you can go online (hot) and do it over the internet, or you can stay offline (cold) and give or deliver the private keys to the person or entity you are doing business with. Some wallets will even allow you to hold your coins inside a disk on key-like device that will only go hot once you plug it into a computer.
Top 5 Bitcoin Wallets
Much like in the real world, the next step would be to determine which wallet brand better suits you. Here is a short list of our favorites to help you choose:
Founded in 2014, it offers a whole platform to buy and sell Bitcoin. They support Bitcoin exchange using 17 different currencies, and they work with Onlinebanktransfer.com, Sofort, OK pay, SEPA and Swift, offering their customers
a wide variety of vehicles to receive or send money after they purchase or sell Bitcoin. The most important feature in their platform is 100% multi signature cold storage. Cubits uses their own Bitcoins in hot wallets for transactions guaranteeing the security of your own Bitcoins within offline wallets. Moreover, the cold storage is encrypted, effectively deploying an additional security ring around your coins.
It was an exciting option in the Bitcoin wallet industry. Circle had a hybrid system, which means that it translated transfers of fiat currency like USD into Bitcoins once a transfer was made to your account, without forcing the sender to buy Bitcoins at all. This made its platform a de facto payment platform as well as a wallet. To mitigate volatility while transactions were being made, Circle absorbed the risk by freezing the rates the second the transaction was initiated and until it was completed. In terms of security, Circle has all of its customer’s funds insured.
Unfortunately the company decided to stop allowing its customers to sell and buy bitcoin. Reports surfaced on Wednesday December 7th, 2016, asserting that Circle will no longer offer the bitcoin option. This Goldman Sachs funded payment service, decided to quit bitcoin because it never became a significant part of its business according to reports.
A truly exceptional Bitcoin wallet and exchange mechanism, servicing 2.8 million customers in 32 countries with a total Bitcoin turnover of $2.5 billion in exchanges. This wallet connects directly to your brick and mortar bank account to exchange Bitcoin into and out of your local currency. It has mobile apps for Android and iPhone apart from the web browser platform. They have insurance on the Bitcoin held within their servers, and offer a secure multi signature vault to store your coins. The vast majority of the Bitcoin held by Coinbase is stored cold. Coinbase recently obtained a Bitlicense from the New York Department of Financial Services, giving it freedom to operate as a virtual currency transmitter in the state of New York.
A simple, easy to use wallet that allows you access to a storage vault for your Bitcoins. Based out of Hong Kong, the company offers cold storage of your funds through encrypted servers that are locked behind concrete walls, steel blast doors and radio wave blocking cages. Additionally, Xapo offers their own debit card.
An innovative platform that will allow for Bitcoin transfers through SMS, making transactions easier. Coinkite has a multi-signature wallet. This means that for a single transaction to take place, it has to be authenticated by a combination of multiple keys. In other words, to steal a Bitcoin from your Coinkite wallet, the hacker will need all the right codes at the same time, making it nearly impossible to steal your funds.
A one to one digitalization of the wallet you are probably carrying with you at this very moment. Trezor keeps your funds secure by keeping them off line inside a disk on key-like device. The device costs $99 USD, but it will remain under your watchful eye as you please. The wallet itself has two buttons: one to confirm an action and the other one to deny it. It is easy to use and compatible with Windows and Linux. Read Full Trezor Wallet Review.
Not every wallet was created equal, but in the Bitcoin world, wallets are very diverse. Just like with the classic wallets, you should choose one that goes with your taste, but you should never compromise on security. Security features vary with each wallet, so be a smart consumer and check them out before you put your money in them. Make sure that you trust the maker of your wallet, and remember, cyber pick-pockets are awaiting, don’t afford them the opportunity to turn you into their next cyber victim!
Now that you have picked a wallet, lets put some coins in it! Read our guide on Buying Bitcoins.