How to choose the best bitcoin wallet to store your cryptocurrency safely

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Proper storage of cryptocurrency is no less important than its profitable and safe acquisition. Since the inception of Bitcoin, there have been people who want to steal it. Modern wallets are already fairly well protected and provide a really high level of security. The editorial staff of Profinvestment.com offers to figure out how to choose a BTC wallet and what they are.

Recommended: A list of the best bitcoin wallets.

Varieties of bitcoin wallets

BTC storage wallets are classified according to different criteria. We will look at the most important ones.

Custodial and non-custodial

Custodial bitcoin wallets store the user’s private keys on their side, which give access to his funds. The advantages of this option are limited to the fact that it is comfortable and simple. It may be relevant for beginners who are not yet working with large amounts of currency, or for temporary storage of small amounts of cryptocurrency. The disadvantages are the lack of control over their own funds. In no case should you store large long-term savings in such wallets.

Pros:

✅  Easy to operate, suitable for beginners.

✅  Convenience for fast transactions.

✅  Functionality.

Cons:

❌  There is no control over cryptocurrency.

❌  The risk of losing funds due to a hacker attack or the actions of developers.

Examples:

  • Coinbase Wallet. Wallet for mobile devices. Closed source. No multisignature and no key import option. You can buy bitcoin with fiat. It is possible to integrate with a hardware wallet.
Coinbase Wallet
  • Xapo. A wallet with Segwit2x, accessible from the browser and on mobile devices. The service stores the keys on its servers, while there is no backup mechanism. Doesn’t integrate with hardware wallets.
  • Holy Transaction. A wallet with a built-in exchange service, supports cryptocurrencies and fiat funds. Only one address per currency can be created. The service uses cold storage of keys.
  • Centralized crypto-exchanges and p2p-exchangers. Sites such as Binance, Bybit, EXMO, Currency, Paxful, LocalBitcoins, Monabey, Livecoin also provide each user with an account where funds can be stored. This method is minimally reliable. It is better to store only those assets on the crypto exchange that are planned to be used immediately.

Non-custodial bitcoin wallets provide the ability to store keys to the user himself. The developer or other third party does not have access to them. This option is somewhat more complicated from a technical point of view, but you do not need to worry about the fact that the service will change its management or it will be hacked, which will affect your funds.

Pros:

✅  Full control over assets.

✅  The security of the keys is entirely up to you.

Cons:

❌  More difficult to use.

❌  You need to understand what security measures will allow you to keep the keys safe.

Examples:

  • Blue Wallet. Fully decentralized wallet. Installed as a desktop program or application on a smartphone, the keys are stored directly on the device owned by the user. Open source, full encryption of operations. HD and SegWit support.
  • Bitcoin Core. “Thick” wallet – works as a full-fledged node in the Bitcoin network. Available only as a computer application. Open source, multisignature support. Keys are stored on the owner’s personal computer, and you can back them up to a file at any time.
  • Wasabi. An open source multi-platform wallet aimed at privacy for Bitcoin users. Support for the CoinJoin protocol for anonymizing transactions (replacing conventional bitcoin mixers).

We recommend: what are custodial and non-custodial wallets.

Hot and cold

Hot bitcoin wallets are different in that they are always connected to the internet. The biggest advantage of storing cryptocurrency in a hot wallet is that it makes day-to-day transactions much easier. The downside is that hot wallets are more likely than cold ones to encounter security vulnerabilities or be attacked by a hacker (although this does not mean that all hot wallets are insecure and cannot store funds in them).

Pros:

✅  Convenience and speed of work.

✅  The only option suitable for people making multiple transactions a day.

✅  A number of hot wallets allow the user to manage funds themselves.

Cons:

❌  The danger of unauthorized entry at the moment when the wallet is launched and interacts with the Internet.

Examples:

  • Samourai Wallet. Bitcoin wallet with a high level of privacy and security. Effectively resists censorship and tracking. If necessary, it can work in offline mode. There is a self-contained full node server.
  • Electrum. Application for PC and Android, one of the oldest and safest. Open source, multisig support. You can protect your account with two-factor authentication. Compatible with hardware wallets.
  • Bitcoin Wallet. Wallet with BTC and BCH support. Keeping the keys completely with the user. Fast payment transactions with InstantPay. Open source and the ability to connect to your own node.

A cold bitcoin wallet involves storing BTC offline – regardless of Internet access. Storing bitcoins in this mode significantly reduces the threat from hackers. When the wallet is offline, there is no need to worry about a hacker gaining unauthorized access to the wallet.

Pros:

✅  Highest possible level of reliability.

✅  Ideal for large or long term investments.

Cons:

❌  Hardware devices are paid.

❌  It is inconvenient if you need to send coins often.

Examples:

  • Ledger, Trezor, KeepKey and others. These are physical hardware wallets – USB drives for storing private keys. Small devices support multisignature when sending transactions and only connect to the Internet when the user needs to make a transaction. The rest of the time they are stored autonomously, completely protected from viruses and hacker attacks.
  • Paper wallets. Printed keys are a free cold storage option. You can send funds to the generated address, but when you need to transfer these funds, you will need to synchronize the keys with this or that application. A handy resource for forming a paper wallet is bitaddress.org.

These are the main cold storage options. There are also more rare ones. For example, you can install any Bitcoin wallet on a smartphone specially purchased for this purpose and keep it permanently disconnected from the Internet. There is also the development of a sound wallet – the storage of private keys in encrypted sound files on compact disks (CDs) or vinyl. Another concept is Deep Cold Storage, this method is used by large companies; the transfer of keys to banks for safekeeping is implied. In this case, you must always confirm the name and address to access the funds.

Recommended: what are cold and hot wallets.

Platforms – browser, mobile, desktop

Browser bitcoin wallets are websites where the user can control their savings by entering a username and password. You do not need to download any applications for this. Experts do not recommend this storage method for long-term investments, but it is suitable for routine daily transactions, since it is convenient and easy to use.

Pros:

✅  Multifunctionality and support for different coins.

✅  Can be run from any device.

✅  Quick and easy account creation.

Cons:

❌  Many services store user keys on their own.

❌  The password can be hacked by hackers.

Examples:

  • Blockchain. Open source wallet, also presented as a mobile application. The user can import keys and seed phrases. When sending a transaction, you can adjust the commission. There is no multi-signature.
  • BitGo. A popular custodian wallet, the main gripe of which is the low degree of privacy. Available only through the site. It is closed source. The keys are stored by the service, multisignature is supported.

Recommended: The best browser wallets.

Mobile bitcoin wallets are focused on use from mobile devices. At the same time, the choice of programs for Android is much larger than that of iOS, this is due to the stricter Apple policy regarding applications added to the store.

Pros:

✅  Always and everywhere with you.

✅  Good security at the moment.

✅  Simplicity and convenience.

Cons:

❌  If the device is lost, you can also lose access to funds (in this case, it is recommended to enable biometric access, if possible, or set a pin code).

❌  Reduced functionality.

Examples:

  • Bither. A fairly secure and anonymous wallet for BTC that does not store user keys and has an open source code. You can import keys and seed phrase at any time to gain control over funds from another wallet.
  • Dropbit. The wallet is only available for Android devices. The keys are not stored by the service, there is no multisignature or two-factor authentication. A voluntary backup mechanism is available.

Recommended: The best mobile wallets.

Desktop bitcoin wallets allow you to store bitcoins using an application installed on a PC or laptop. As a rule, in this case, the keys are always located on the device, so their safety completely falls on the shoulders of the owner.

Pros: ✅

✅  Keeping keys on the user’s side.

✅  Convenience and extensive functionality.

Cons: ❌

❌  You need to download and install, and later you can use the tools only from a specific computer.

❌  Permanent network connection.

Examples:

  • BitPay. Non-custodial wallet with the ability to regulate commissions in transactions sent. In addition to Bitcoin, it also supports other popular cryptocurrencies. You can buy with a bank card.
  • Armory. Not a bad and secure wallet, but its disadvantages include a rather high complexity of use and an outdated interface. There is open code, multisignature, the keys are at the user.

Recommended: what are desktop wallets.

Criteria for choosing a suitable bitcoin wallet

Let’s consider how to choose a Bitcoin wallet for permanent or periodic use. This primarily depends on your personal needs. Here are the key criteria to look out for when choosing:

✅  Custodial / non-custodial. We have already explained these concepts above.

✅  Backup mechanism. The backup will help to regain control of funds in case of loss of access to the wallet. Copying can be voluntary or mandatory.

✅  Is it possible to run a node – a full-fledged software that connects to the Bitcoin network and gives you extended control over your funds.

✅  Using TOR onion routing to enhance anonymity.

✅  Multi-signature. Sharing wallet access increases security.

✅  Two-factor authentication. Additional confirmation of the owner’s identity when entering the wallet. Also, some mobile services allow you to connect biometrics or PIN-code.

✅  Ability to connect a hardware wallet.

✅  Controlling the size of the transaction fee – is it possible to independently determine the balance between speed and spending.

✅  Confidentiality. What personal data is required to provide the service.

✅  Opportunities for exchanging BTC for other cryptocurrencies and / or fiat.

There are a lot of nuances – these are the ways of contacting support, and the range of interface settings, and the availability of transaction anonymization functions. In addition, although the vast majority of wallets are free, there are also paid services, you also need to pay attention to this.

How to secure storage of bitcoin

Users can lose Bitcoin keys as a result of theft, computer failure, hacker attack, and more. The safest storage option is a cold wallet, hardware or paper.

Experts advise also to store keys in several places offline. In this case, if one repository is destroyed or lost, others will remain. Many people buy home safes specifically for cold wallets, or even put them in safe boxes. This is justified if you plan to store really large amounts there.

Newbie tip: no one ever needs your private keys. If some person or service asks for them, then they are guaranteed scammers. Another thing is the address, it can be distributed completely freely so that bitcoins can be transferred to you.

Recommended: how to protect your cryptocurrency wallet.

Expert opinions

The developers of the Exodus wallet advocate that each user should have 100% control over their funds. At the same time, they give a number of useful tips, thanks to which you can significantly increase the security of keys. We recommend that you familiarize yourself with them.

The developers of Ledger pay maximum attention to privacy and talk about how you can additionally protect even such a reliable storage method as a hardware wallet.

Well-known bitcoin evangelist Andreas Antonopoulos expressed the opinion that mobile wallets are the best among software wallets, since most computers and laptops are not well protected for storing cryptography. At the same time, modern operating systems for smartphones are extremely safe as long as the user does not forget to update, set a PIN, and be careful about which applications they download.

According to the creators of Trezor, only decentralized networks and autonomous storage systems meet the principles of cryptocurrencies and provide individual freedom, combined with resistance to censorship. Hardware wallets allow anyone to join decentralization, even if they don’t have specialized technical knowledge.

Recommended: an overview of ways to store bitcoins.

Conclusion

We hope that our guide to choosing a Bitcoin wallet helped you and you were able to decide which storage method is best for you. Treat holding cryptocurrencies no less responsibly than real money – bitcoin already has great value.

We recommend using hardware wallets as they are the safest way to store your bitcoins.

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