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.
Hot wallets
Despite hot wallets being less secure, they
have their own specific uses. Here are some of the most popular hot wallets on
the market:
Mobile wallets
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
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
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
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 wallet
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
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.