Exchange Based Bitcoin Wallet
Most people buy Bitcoin at an exchange like Coinbase, Binance or Kraken. You can then choose to store it in your Bitcoin account at that site. This offers some clear advantages. It is extremely convenient. You can log into your account at any time and from any device, and then send BTC to another wallet. You also do not have to pay a withdrawal fee for sending it to an external wallet.
However, using an exchange based Bitcoin wallet poses significant security risks. Mt. Gox was by far and away the world’s largest crypto exchange in 2014, when it announced that hackers had stolen 850,000 Bitcoins. The exchange went bankrupt in May 2016, with creditors claiming they were owed $2.4 trillion, but the leading Bitcoin exchanges in operation today have been hacked since then.
In 2019, hackers stole more than 7,000 Bitcoins from Binance, which is now the world’s top crypto exchange by volume and traffic. Lots of other major exchanges have been successfully targeted by hackers, so you leave your Bitcoin in your exchange Bitcoin account at your own risk. It should be fine if you plan on trading it or moving it quickly, but it is generally safer to move your BTC to an external wallet if you plan to hold it for any reasonable period of time.
Web Based Bitcoin Wallet
Another convenient option is to move your funds from the exchange to another web-based wallet. You might find that the web-based wallet offers better functionality and account management tools than the Bitcoin wallet at an exchange. Once again, this is a very convenient option, as it is just like an online bank – you log in from anywhere, check your balance, send and receive funds and log off.
However, it poses the same problems as an exchange based Bitcoin wallet. It is online, so it can be hacked and it leaves you at risk of phishing and other scams. For this reason, web-based Bitcoin wallets are called hot wallets.
You also do not control your funds. The web-based wallet provider could collapse, causing your Bitcoin to disappear into the ether. It could freeze your account for spurious reasons. Most people searching for the best Bitcoin wallet option therefore ultimately decide to move their coins to an external wallet where they control the keys.
Not your keys, not your crypto, is a good mantra to bear in mind when seeking the best Bitcoin wallet. You control your keys at the leading external Bitcoin wallet options, so most people sacrifice a modicum of convenience to achieve greater security and control over their funds.
Desktop Bitcoin Wallet
This is a software Bitcoin wallet that you can download. It then sits on your desktop. Most desktop Bitcoin wallets are password protected and feature a recovery seed phrase. You can use this phrase to restore your wallet if it becomes compromised or your computer crashes.
You can use your desktop wallet to send and receive Bitcoin, to manage your account and to store your funds. Many desktop-based Bitcoin wallets also allow you to exchange Bitcoin for other cryptocurrencies. Just make sure you are getting a decent exchange rate if you decide to use this service.
A desktop wallet is pretty useful if you sit at a desk all day, but it is not so helpful when travelling. You must also remember that your desktop wallet is only as secure as the computer it is installed on. It is therefore imperative that you follow strict security measures, keep your apps and operating system up to date, avoid suspicious sites and do not download material from untrusted sources. Visiting a malicious website can cause you to inadvertently download and install malware that opens a door to your computer and gives a hacker control, allowing the hacker to steal your funds.
Mobile Bitcoin Wallet
A mobile Bitcoin wallet is very similar to a desktop wallet, but it sits on your phone. In fact, many software wallets work on desktops and mobile devices. Exodus is one of the leading suppliers. It is free, simple to use and is backed by strong customer support. Mycelium is another popular mobile wallet – some claim it is the best android Bitcoin wallet – while you can also check out Electrum.
A mobile Bitcoin wallet is also very convenient. You can make payments and receive money while out and about, and this is a popular option among travelling business executives seeking the best Bitcoin wallets. Software wallets that sit on your mobile are great if you treat Bitcoin as a currency rather than an investment asset, as you can make lots of transactions throughout the day with ease.
However, it can be a nightmare if you lose your phone or it is stolen. You should be able to recover your wallet by using your seed phrase, but you could be without your funds for a while. A mobile Bitcoin wallet also leaves you vulnerable to hackers for the same reasons mentioned above.
Paper Bitcoin Wallet
This is an old-school method of storing your coins. Many investors believe it represents the best Bitcoin wallet choice due to its sheer simplicity. You simply print off a wallet address and private key on a piece of paper and use it to send and receive Bitcoin. BitAddress and GitHub allow you to do it in a safe, secure fashion.
However, there are some downsides to a paper Bitcoin wallet. Bitcoins are kept safe and offline, but it is not exactly convenient, and you cannot easily monitor your balance. The piece of paper can also be lost or damaged by water or fire, or the ink could fade. Someone might also steal it, so a paper wallet comes with its own inherent risks.
Hardware Bitcoin Wallet
Many people searching for the best Bitcoin wallet ultimately decide that a hardware wallet is the best option. It offers cold, offline storage. It theoretically cannot be hacked like an online Bitcoin wallet, as it is not connected to the internet. You do still need to be careful, as there are sophisticated scams that seek to extract private keys, but in general an offline hardware wallet is a lot safer than a hot web-based or software wallet.
It is also a lot more durable and robust than a paper wallet. The best new hardware Bitcoin wallet devices have an OLED screen that allows you to confirm transactions, and they use a two-factor authentication system, a secure PIN method and a strong recovery seed setup.
Ledger and Trezor are the leading hardware Bitcoin wallet providers. They also work in tandem with some software wallet providers, allowing you to blend security with added levels of convenience. The main downside to a hardware Bitcoin wallet is that you have to pay for it, whereas most other Bitcoin wallet choices are free.
Full Node Wallet
This is an interesting option whereby you download the entire Bitcoin blockchain onto your computer. It is highly private, but it does take time, patience and technical competence to set it up. You also need a fast, reliable internet connection, a lot of bandwidth and considerable hard drive space.
The downside is that a lot of these wallets are basic, with limited features. They also support Bitcoin only. Many people looking for a BTC wallet also end up deciding to buy altcoins like Ether, Polkadot, Cardano, Litecoin, Bitcoin Cash and so on, and that is not possible with a Bitcoin blockchain full node wallet.
Choosing the Right Bitcoin Wallet
Finding the right Bitcoin wallet for your needs is really a matter of personal preference. Traders are often perfectly happy to leave their BTC in an exchange wallet, as they do not want to go through the hassle of sending and receiving their funds each day. However, if you plan to keep hold of your funds for a reasonably long period of time – Bitcoin aficionados refer to it as HODLing, holding on for dear life while the price fluctuates – it is generally advisable to transfer your BTC to an external wallet.
Some people feel comfortable holding small amounts of Bitcoin in software wallets, but you really should consider investing in a hardware wallet if you plan to store it for a considerable period of time. You can link a Trezor hardware wallet to an Exodus desktop or mobile wallet if you want added convenience and functionality, while Ledger has an app that you can run in tandem with it. Downloading the entire Bitcoin blockchain for a full node wallet is also pretty secure if you are able to do so.
Key Bitcoin Wallet Attributes
There are some key considerations you should beat in mind when searching for the best Bitcoin wallet, regardless of the type of Bitcoin wallet you go for:
This should always be your primary concern, as an insecure wallet is no use whatsoever. Check to make sure the Bitcoin wallet uses aggressive encryption software if it is a software or web-based wallet. Look for wallets that have a long history of avoiding security breaches and that offer strong backup and restore features.
It is always best to retain control of your private keys when using a Bitcoin wallet. That means the money is held by you and not the wallet provider. The crypto space is new and it is not heavily regulated, so you could lose your Bitcoin if something goes wrong at the wallet provider.
Ease of Use
Many people are happy to sacrifice convenience and user-friendliness in order to gain greater levels of security. However, if two wallets are equally secure, it makes sense to choose the one that is the easiest to use. Ideally, a Bitcoin wallet will allow you to make quick and effective transactions, display your balance and provide some useful analytical tools. Some wallets also offer built-in exchanges.
It is beneficial to find a Bitcoin wallet backed by an active, talented development team. That means the wallet will be compatible with new devices, take advantage of technological and security developments and so on, while the overall user experience should continually improve.
Many crypto enthusiasts start off by looking into how to get a Bitcoin wallet, but once they create a Bitcoin wallet and start building up their holdings they often start to get into altcoins. It is therefore advisable to find a hardware wallet that is compatible with a large range of altcoins. If you download the full blockchain, it will only be a bit coin wallet, but if you go for a hardware or software Bitcoin wallet then you should demand versatility.
Customer service is a key consideration for many people that invest in crypto. If a transaction goes awry, it is helpful to be able to speak to an adviser promptly at any time of day or night. Customer support levels are notoriously poor in the crypto space, but the situation is improving, and some Bitcoin wallet providers are actually pretty good at providing decent service nowadays.
How to Create a Bitcoin Wallet
The process for setting up a Bitcoin wallet is very simple. If you want to use a web-based wallet, you simply visit the site, enter some basic personal details and then you can start to use it. If you want a desktop wallet, visit the provider site and download it. Avoid downloading from a different site, as it could be malware. If you want a mobile app, visit the app store.
Buying a hardware Bitcoin wallet is slightly more laborious. You will be provided with clear set-up instructions. You must connect the hardware wallet to your computer, visit the provider’s website, and install any necessary accompanying software plus the latest firmware. You can give your device a name and set up a PIN.
It is imperative that you write down the recovery seeds when setting up a Bitcoin wallet. Ideally you should write the words down on a single piece of paper and put it somewhere extremely safe. For extra security, you can leave a word or two off the paper if you are confident that you will remember it. If you want a paper wallet, simply visit a site like GitHub and follow the instructions, but you should try to complete the process in offline mode and then keep your paper laminated and safe.
Conclusion – Getting started with a Bitcoin wallet
You have a huge range of options at your disposal when searching for the best Bitcoin wallet. Setting up a Bitcoin account at a crypto exchange and leaving your funds in it is generally inadvisable, so it is worth seeking out a safe and reliable external wallet provider. Just make sure you conduct thorough research into the security record, ownership and trustworthiness of any Bitcoin wallet you are considering investing in.
Also, keep general safety measures in mind – do not download anything from untrustworthy sites, avoid exchanges with bad reviews and do not tell people how much Bitcoin you have. It is also worth upgrading your Bitcoin wallet every so often, as new hardware wallets are released and better software wallets are created as the sector matures.
Bitcoin Wallet FAQ
🤷♀️ What is the best Bitcoin wallet?
The best Bitcoin wallet varies depending on the amount you plan to hold, the level of transactions you expect to conduct and how long you want to hold it for. The safest options are full node wallets, hardware wallets and paper wallets. However, some people are happy leaving Bitcoin in their crypto exchanges for a short period of time, or they like the convenience of a software wallet. Be sure to check out our finance reviews to find out which wallets we prefer here at Betting.co.uk.
🕵️♂️ How do I get a Bitcoin wallet?
You must first decide on the type of Bitcoin wallet you would like and then identify a safe and reliable wallet provider. If you want a hardware wallet, you must buy it directly from the company or from a trusted third-party retailer. However, you can simply download software wallets from the app store or the company website. Be sure to consult our crypto reviews here at Betting.co.uk before you get set up.
🚨Is a Bitcoin wallet safe?
Bitcoin wallets really vary in terms of the safety levels they provide. There are some hot web-based wallets and exchange-based wallets that offer very little in the way of security, whereas certain full node wallets and hardware wallets offer a great deal of safety and privacy. Make sure you conduct thorough research into the security record of a Bitcoin wallet provider before using it – our reviews here at Betting.co.uk have everything you need.