What's in your wallet? Well if you are one of the ever-increasing supporters of cryptocurrency, Bitcoin. With the adoption of the popular “mother-of-all-coins” on the rise and new coins being launched every day, it can be hard to keep track of them all, that's where a wallet comes in. They come in many different types and there isn't a one size fits all as everyone has different needs and security concerns, as well as some wallets not supporting certain coins.
What is a cryptocurrency wallet?
Wallets are just a way to store your coins, much like a traditional wallet, except in this case 1 Bitcoin weighs the same as 1000. The wallets don't just act to hold your coins for you though, they store your private key, which is connected to the public key and ledger that shows ownership over a certain coin. This allows you to send and receive cryptocurrency, and also acts as a personal ledger of transactions. Many coins have a specific wallet they are tied to or support.
There are risks involved in storing coin. And we have seen some failures before. With Mt. Gox being hacked and Bitfinex losing 120,000 bitcoin back in 2016. So what is a safe place to store your coin?
That is based on your individual security and coin needs. So let's go over the different types.
Seen by most as the most secure way to store your coins. Paper Wallets are just that. Wallet information is stored on paper, usually in the form of a QR code that stores the users public and private keys that make transactions possible. The physical codes are scanned in with software to verify the transaction. The upside to this is that with your keys being stored physically, no one can hack into them. The downside, if you lose or destroy your key, poof, it's gone, game over man. You won't be able to access it without the private key. You can always print the key codes onto something less perishable, like a piece of metal, or plastic, held in a safe, or as some die-hard security buffs have done. A tattoo on your body of your keys.
The best part of bitcoin wallets is that the type of medium that the coins are stored on is the name of the wallet. Desktop wallets are no exception, coins are stored on the users desktop using software. These wallets are useful for those who buy and sell bitcoin semi-frequently. They are generally user-friendly and come with ton's of features, the only thing it lacks is the mobility of mobile wallets. The most popular of these is Electrum, which has both the functionality for expert users and is also easy-to-use for beginners. These wallets are generally pretty safe when it comes to not getting hacked, but if someone gains access to your computer you're in danger of compromising your coin.
Take your coins with you. The mobile wallets are ideal for users who may make transactions on the go or actually spend their coin in a store. With Bitcoin becoming more and more accessible these wallets are almost a must-have. Some of the most popular Apps for wallets on the go are Mycelium and Bread Wallet. These make it easy to spend the coin. However, some worry that the apps are vulnerable to hackers and less than savory characters, users of these wallets are also in danger of losing their coin if they misplace or break their phone.
Online wallets keep a lot of flack, due to them running in your browser they are a lot more vulnerable to cyber attack. Holding coins in Online wallets like GreenAddress are usually secure and you retain ownership of your coin. However, if you store your coin in online wallets that are part of the exchanges, like Coinbase, you don't physically own the coin themselves, a lot of users found this out the hard way during the bitcoin cash hard fork that paid off for users who physically controlled their coin, as they received 1 bitcoin-cash for every Bitcoin they held. Users who had coin stored in coin base did not receive the bitcoin-cash, as they didn't have control over their bitcoin.
Really the best of all worlds when it comes to buying, selling, and using a coin for transactions. There are a ton of different hardware wallets, from simple ones that plug into your PC using a USB stick to others. They store your coins digitally, but offline, making them nearly as secure as paper wallets, without the risk of losing a piece of paper. Since they are stored on the device themselves you can even insert them into a malware infected computer and still use is as secure as you would on your own.