We have all heard those sad stories of unfortunate people loosing their bitcoins. From online wallet hacks to desktop trojans watching for passphrases – the world of cryptocurrency storage is only in its early stages. A realistic strategy is always needed when securing your digital assets – both for long term storage and for everyday use.
I strongly believe that choosing a good wallet is the most important part of learning how to use bitcoin. Using a safe storage solution is still not an easy task. In fact, the most convenient wallet systems (web-wallets) are usually the most unsafe. Thankfully there are many extremely safe options for holding your bitcoins. Throughout this page I’ll help you choose the best wallet for keeping your digital currency safe.
To keep things simple: remember that the private keys of your wallet are what enables sending the coins elsewhere. The safest wallets are those where the private keys are kept hidden away from the outside world to see.
Use the following table to quickly compare the advantages and disadvantages of each wallet type:
|Hardware||very safe||average||average||90 – 400 usd|
|Paper||very safe||difficult||not convenient||usually free|
Online web-wallets are websites or even online exchanges that allow storage. As I mentioned above, this is the least secure option as it usually involves leaving the management of your private keys to a web server. Web servers are prone to hacking, and users must also trust the online wallet operators. It is however a really convenient way to keep a couple dollars worth of bitcoin online for quick and easy payments. If you have large amounts, then never keep it all in a web-wallet.
Here are the best web-wallets:
- Each of the best sites to buy bitcoin have free online web wallets. Note that these are custodial web-wallets (the exchange operators own & manage all private keys on your behalf).
- Blockchain.info – Simple user interface, no ID verification needed to use it. HQ based in Luxembourg
- Greenaddress – Synced wallet that works across your devices. Browser extension and smartphone.
- Coinbase standard wallet (insured storage) – Super popular, based in US. No fees to send BTC to other Coinbase wallets.
- Coinbase vault storage (for advanced users) – Extra safe multisig wallet with redundancy in case of website failure.
A mobile or smartphone wallet is, as the name suggests, a bitcoin wallet on your smartphone. I love mobile wallets because it is really easy to scan QR codes with my phone’s camera to make quick payments to friends and merchants. Nomenclatures may vary, but I definitely consider mobile wallets to be as unsafe as web-wallets in terms of private key security. I say this because most mobile apps automatically update by themselves. If a hacker got access to the developer’s Itunes/GooglePlay account then they could potentially infect and steal millions of users wallets as their next update gets pushed through. Nevertheless, this type of wallet is great for having small amounts ready to pay.
The top mobile wallets for iOS and Android are:
- Breadwallet – simplest wallet for iPhone and more recently available on Android
- Mycelium – HD wallet with many features including support for Ledger & Trezor (hardware wallets), Tor (a privacy-focused mesh network), watching addresses.
- AirBitz – Easy to use and great for less technical users
- GreenBits – Functional yet basic and support for Ledger + Trezor.
Desktop wallets are apps installed on a desktop computer or laptop. Many people store significant proportions of their bitcoins in desktop wallets as these are much safer than web or mobile wallets. If you asked me a few years ago, I would have said that this is the safest way to store bitcoins. Now, in 2017, with all the backdoor hacking stories, I would prefer using a variety of offline wallets (desktop, hardware, paper) to store my bitcoins. If you are comfortable with ensuring your PC’s security and/or using a Linux system (Windows is considered the least secure operating system) then this may be a relatively secure option for you. A desktop wallet could also be an option for keeping a certain percentage of your portfolio.
Here are the most secure desktop wallets:
- Electrum – most popular desktop wallet because of simplicity. Users have to write down a seed when creating their wallet. Can be integrated with the Trezor or Ledger hardware wallets.
- Exodus – also very simple to use within an in-built instant exchange (to swap between major altcoins). Popularity for this wallet has been growing significantly. I noticed that Exodus gained many new users after Multibit wallet shut down (developers ceased maintaining their product).
- Armory – a very secure and feature-laden desktop wallet for advanced users. Offline signing options make this extra secure. Note: this wallet requires BitcoinCore to function. Bitcoin Core is the original Bitcoin desktop wallet, but it needs to download the whole blockchain (>100GB large!) to work. I have not listed Bitcoin Core here for this reason.
Hardware wallets are very sophisticated semi-cold storage (mostly offline) systems. A piece of hardware is used to store the private keys to your bitcoins. Every time you want to send coins then you’ll just connect the hardware wallet to a PC and then take it offline again once the transaction is complete. Keep in mind that you have to buy hardware wallets, unlike the other types of storage solutions which are mostly free. Although you still have to trust the hardware-wallet manufacturer & suppliers, many people claim that this is the safest type of bitcoin wallet.
These are the most popular hardware wallets:
- Ledger Nano – has a screen yet is priced cheapest. Most popular hardware wallet.
- Trezor – easy to use for beginners, nice user interface. More expensive than the Ledger Nano
Note: some experts suggest that hardware wallets are not real cold storage (completely offline) because they require USB connections to make transactions.
I feel that using a paper wallet is the most secure cold-storage solution (more so than hardware wallets). With a paper wallet you only have to trust the wallet-creating software and the physical location that it will be stored in (usually a safe in a bank or at home). As with all super-secure solutions, this is the least convenient as you’ll need to create a new paper wallet every time that you want to send bitcoins somewhere. If you are planning to hold on to your cryptocurrency for a long time without spending it, a paper wallet could be a super-safe option for you.
Here are the most trustworthy paper wallet systems:
- Coindesk has a guide for how to make a paper wallet
Note: I no longer recommend paper wallets to beginners. Such storage systems may seem safe at first glance, but you need to be careful how you create, print, and spend your paper wallet bitcoins.
It is still possible for beginners to have a paper storage system. Simply write down your desktop wallet recovery phrase on paper – voila!
Seen as the next generation of crypto wallets, blockchain-based apps provide a holistic approach to storing coins and keys. One of the main players in the blockchain crypto wallet market is eToro USA. Through its subsidiary eToroX, this trading platform gives customers the ability to buy digital tokens and store them in a preparatory wallet. Indeed, since going live in 32 US states in the first quarter of 2019, eToro USA has been forced to abide by local regulations. This means it can’t offer crypto-based contracts for difference (CFD) in the same way it does in Europe.
To counter this and improve its service, eToroX allows users to buy the underlying asset of 13 cryptos, including Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and more. From this, users with Gold accounts or better can use the eToro US wallet. Available for iOS and Android devices, Gold+ users can send digital tokens to/from their accounts (limited to amounts they’ve initially deposited via wire transfer – the minimum deposit is $500). Alongside the platform’s social trading feature that allows users to follow the trades of experts, eToroX wallet accepts multiple coins. This means you can use a single storage point for all your eToro investments.
However, the reason this wallet stands out is its blockchain base. Once you create an account, you’ll receive a personal blockchain address. This allows you to make speedy on-chain transactions and, more importantly, it acts as a store for your private key. In practice, this ensures your key is 100% safe and, moreover, you never have to worry about losing it. For novice users, this holistic solution is one of the easiest ways to move tokens to and from an exchange.
Most bitcoin wallets simply need one private key signature to make a transaction. Multi-signature wallets require multiple private key signatures to make a transaction. For example, if you wanted to send bitcoin you would first need to authorize the transaction, and then another trusted person would also need to authorize it. Neither you nor the other person can make a transaction on your own. Both parties require the other’s consent (signing) to make a transaction. This allows for some pretty advanced features and very safe storage solutions. This type of wallet is great for business using bitcoin.
Multi-signature capabilities are sometimes available in web, smartphone, desktop, and hardware wallets.
These are the best wallets for multi-sig capabilities:
- CarbonWallet, Coinbase, or Block.io (web-wallets)
- Blocktrail, CoinKite, Copay, GreenAddress (mobile wallets)
- Electrum or Armoury (desktop wallets)
Hot vs Cold Wallets
The terms “hot” and “cold” are used to describe the online connectivity of a bitcoin wallet, and by extension, its risk factor. Here is the difference between the two:
A hot wallet is constantly connected to the internet with the private keys loaded ready for use. For this reason a hot wallet is riskier because a hacker can theoretically access the private keys if they find a vulnerability. Sometimes I hear people use the term “online wallet” interchangeably with “hot wallet”. Hot wallets make it easy to do transactions quickly and on the go. Web, smartphone, and, to a certain extent, desktop wallets can all be considered “hot” wallets.
A cold wallet is not connected to the internet and the private keys are offline. Sometimes I hear people use the term “offline wallet” interchangeably with “cold wallet”. Cold wallets are therefore safer because hackers would have a very hard time accessing your private keys. Some cold wallet systems need to connect in order for transactions to be made. Others allow transactions to be signed completely offline and subsequently broadcast it to the bitcoin network (without connecting the private keys). Hardware (USB) and paper wallets are popular cold wallet systems.
The term “warm wallet” is occasionally used by experts when describing cold wallet systems that must connect to the internet to make transactions (most hardware wallets must do this). A warm wallet can be defined as a mix between a cold wallet and a hot wallet. Warm wallets are therefore not as safe as pure “cold” wallet systems, but they offer some conveniences of a “hot” wallet.
Watch Andreas M. Antonopoulos (a bitcoin expert, author, and entrepreneur) talk about his personal wallet choices: