Throughout the course of bitcoin’s tenure, it has developed in several ways. First of all, it’s much easier and safer to buy bitcoin. Peer-to-peer marketplaces offer hundreds of payment options and have several security protocols in place to keep your money safe.
Another way it has developed is through an essential part of bitcoin trading: the bitcoin wallet. There are now several types of bitcoin wallets—all that cater to a specific trading style. There are no bad wallets for anyone out there, just wallets that are wrong for your trading style. Each has its own set of pros and cons, and this article is going to cover each and every one of them.
Bitcoin wallets can be separated into two main categories: hot wallets and cold wallets. Hot wallets are those that are always connected to the internet. Cold wallets—although some have the option to connect to the internet—remain mostly offline. This makes cold wallets inherently more secure as hot wallets are susceptible to online hackers.
Despite hot wallets being less secure, they have their own specific uses. Here are some of the most popular hot wallets on the market:
These are applications that you can install on your iPhone or Andriod smartphone. They’re perfect for people who are always on-the-go and for people that like to use their bitcoins in the outside world.
However, it’s susceptible to hacks if a person gains unwanted access to your cellphone. There’s also no guarantee that you’ll keep your bitcoins if your phone gets damaged or lost.
Desktop wallets are applications that are downloaded specifically for laptops and personal computers. There are wallets that run on all systems—Mac, Windows, Linux. When you download them, they come in software packs that need to be installed into your system.
These are mostly for people who are on their laptops more than their phones. Although they’re less mobile than mobile wallets, they’re also generally more secure. They also have the curse of the hot wallet—susceptible to hacks if people gain unwanted access.
Web wallets are often the wallets that bitcoin exchanges give you for free when you sign up. They’re perfect for newbies and for people who want to try out new exchanges. Although it’s not ideal to hold large amounts of bitcoin on these wallets, it gives newbies and potential traders a taste of what bitcoin trading is like on a specific exchange.
In most cases, the platform will hold your private keys—giving you less control in regards to your money. Although there are platforms that allow you to hold the private keys, it’s starting to become rare.
Cold wallets are definitely more secure than hot wallets, but they do have their own disadvantages as well. Here are the two most popular cold wallets:
Hardware wallets are widely regarded as the most secure bitcoin wallet out there. They’re physical devices that are built specifically for handling private keys and public addresses. They look like USB flash drives with an OLED screen and buttons that are used to navigate through the interface of the wallet. With most hard wallets, you should be able to back everything up as well as enable 2FA on the actual device to secure your transactions even further.
The downside to hardware wallets is that they can often get a bit pricey. This is why they’re ideal for people who hold a significant amount of bitcoin and need to make sure that they’re wallet is top of the line. One of these devices can set you back more than $100 (with some even reaching $150 or $200). If you’re willing to pay, you can rest knowing that your bitcoin is safe.
Paper wallets are sometimes regarded as cheaper alternatives to hardware wallets, but the two are almost nothing alike. Paper wallets are literal pieces of paper that have your private keys and public addresses written down on it. When you generate a paper wallet, two QR codes are created. The first is a public code for the public key to receiving crypto and the second is a private code for the private key.
Just like hardware wallets, paper wallets are not meant for beginners. Paper wallets are very technical and could be very intimidating to a newbie. Also, you cannot spend a fraction of what’s in your paper wallet. It’s either you withdraw the whole amount or nothing at all. It’s also a one-time-use meaning that when after withdrawing everything, you can’t use that wallet anymore and you’ll have to generate a new one. This makes it ideal for people who hold their coins for long periods of time (HODL).
What’s your trading style?
As you can see, there is no such thing as a bad wallet—just wallets mismatched with wrong trading styles. Before even deciding what wallet you want to use, you have to first figure out your trading style. If you’re a HODLer, you’ll probably want a paper wallet. If you’re just starting out, it might easier to use one of the hot wallets. If you’re a seasoned veteran, you can splurge for extra security on a hardware wallet.