Cryptocurrency prices across the board reached their highest peaks in early 2021, largely due to an exponential growth in Bitcoin’s popularity. As more people acquired the coins, the demand for cryptocurrency wallets soared. Bitcoin is an especially interesting study in crypto wallets because of its immense value. People need secure and reliable wallets to keep their valuable coins.
Since you are here, we believe Bitcoin wallets are something you have been thinking about. Whether you are just curious or need to use one, this guide will help you to shortlist some of the best Bitcoin wallets in 2021.
Our Top Picks of The Best Bitcoin Wallets
Bitcoin wallets are in plenty, especially since the digital currency accounts for over 60% of the entire cryptocurrency market value. It is not easy to find the best wallet because you will have to sieve through lots of undesirable options. Below is a list of some of the best Bitcoin wallets.
What Is The Purpose of a Bitcoin Wallet?
A cryptocurrency wallet serves as a place from where you can send, receive, and store crypto coins such as Bitcoin. The cryptocurrency wallet is not a physical thing but a piece of software. This piece of software can come in many forms, including inside a piece of hardware, on a piece of paper, or as a bundle to be installed on a desktop or mobile device.
But cryptocurrencies are not material things; what then does the wallet store? Let us take a step back and consider digital currencies. It is true that a digital currency such as Bitcoin exists but without a physical form. Instead, the coins are simply a series of letters and numbers that a computer can read and decipher the information they carry.
The entire concept of cryptocurrencies is built around a cryptographic system that depends upon keys for identification. Two types of keys represent the coins in your possession. First, there is a public key. This key is sharable and associated with the wallet address, and it is what other parties in the crypto-verse use to identify you. The second key is a secret that only you should know, and that is why it is called a private key. A private key authenticates and encrypts your identity.
You need the private key to access your public key, which carries your public transaction signatures and Bitcoin address. A transaction is only possible when there is a successful marriage between your public and private keys. By now, you can guess that a Bitcoin wallet stores your private keys to protect your coins and transaction signatures.
This concept sounds interesting, and perhaps you will like it more after you have seen how the wallets work. Assume for a moment that a Bitcoin wallet is similar to your account at the bank. The public address is your account number. It is the number you share with people from whom you are expecting money (in this case, Bitcoin). Also, people to whom you send coins can see this public address.
The public address is unique to you, meaning no other person can ever receive coins in your stead. Let us think back to the bank account. Because the bank account number is public, anyone can claim it is his/her unless he/she can produce supporting documents. Banks often ask for identification documents, a signature, and a pin code–if you are using the ATM. All these are security measures that make sure only you can claim the account and its contents.
Let us extrapolate this idea to Bitcoin wallets. The private is, therefore, the password that gives you access to the wallet. As such, each Bitcoin wallet has a public key (bank account) for public identification and a private key (pin code) to legitimise your claim to the wallet.
We said at the beginning that the piece of software that is a cryptocurrency wallet comes in different forms, so let us explain.
A Bitcoin wallet can be a software that you can download and install on your desktop computer. The wallet can only work on a specific device because the keys cannot be replicated. Now, this is what we call a desktop wallet. Some desktop wallets are open source, and others are premium.
The other wallet type is a mobile wallet. This software is bundled into a mobile app that you can download from a relevant app store. The mobile wallet is the most convenient software wallet, unlike the desktop wallet, because you can easily carry it around. You can scan QR codes at supermarket POS and pay for your groceries.
There are also online or web wallets. You can use these wallet types without downloading any software on your device. These wallets offer the best convenience but at the expense of security because they are the most vulnerable to hackers.
Hardware wallets are simply software inside a piece of hardware, such as a thumb drive. The hardware has a place for keying in your password for security. This wallet type provides better security compared to all of the options mentioned above, but not more than paper wallets. A paper wallet entails a piece of paper on which you print a QR code. Bad actors have no means of accessing this wallet unless they get their hands on the piece of paper itself.
How To Find The Best Bitcoin Wallets
Check Security Features of Bitcoin Wallets
Bitcoin wallets are of two kinds, those that are always connected to the internet and store your private keys online (hot wallets) and those that store them offline (cold wallets). Hot wallets face security risks from hackers, but cold wallets are safe so long as you keep them to yourself. Although hot wallets offer more convenience, security should be more urgent.
Check Fees for Using the Bitcoin Wallets
Most Bitcoin wallets charge fees when users send coins to other wallets to cover network fees (also called miner fees) and maintain the wallet's security infrastructure. Usually, more secure wallets charge higher fees, but you can find some with lower fees and commendable services. You should prioritise security features since most fee structures are within a small range.
Additional Features of Bitcoin Wallets
Security is a primary concern for Bitcoin wallets. Some Bitcoin wallets offer high-end security through their hardware devices with additional protection using pin codes. There is no better demonstration of how Bitcoin wallets can fuse convenience and security. Storing coins on a QR code printed on paper is also an interesting additional feature.
Is a Bitcoin Wallet Trustworthy?
Storing Bitcoin was a huge problem in the past when the only services you could get were exchanges such as Mt. Gox. If you are familiar with the Mt. Gox story, you are aware that the exchange lost millions of customers’ money after a major hack. Fortunately, the industry learned from the tragedy, and the race to create the most impenetrable cryptocurrency wallets began.
Also, early wallets were bulky and buggy. However, things began to change rapidly in 2013 after the first dedicated Bitcoin wallets were launched. Since then, numerous wallets have appeared on the market, and most have performed aboveboard in matters of security.
Today, the cryptocurrency wallet sector operates as a serious industry of its own, especially after cryptocurrency started making inroads into the mainstream. Crypto wallet companies are now professional entities that have licenses to operate and the list of wallets selected in this guide includes the ones that are licensed/regulated. As such, Bitcoin wallets are more trustworthy today more than ever before.
As Bitcoin continues to shake up legacy finance, the need for bank-level security is growing. Bitcoin wallets have so far stepped up to the plate, and their services are getting better. Wallets can also facilitate the buying and selling of Bitcoin, a very critical service required by all users.
Bitcoin wallets are a necessity now. Different providers have come up with unique products, but security remains the primary focus. While most of the wallets are secure, cold wallets have more security features than hot wallets.
Frequently Asked Questions
A Bitcoin wallet is a software program whose primary function is to store special strings of characters representing a user’s private and public keys. The piece of software facilitates Bitcoin transactions the way a bank account facilitates fiat currency transactions.
Yes. Bitcoin wallets are available in the form of smartphone apps stored on either Android’s Google Play or Apple’s App Store. This is the most convenient wallet type because you can use it on the go.
A hot Bitcoin wallet is that which stores your private and public keys online. Such wallets are vulnerable to hackers.
Yes, this is the most secure Bitcoin wallet as no hacker could ever gain access to it. The wallet is simply a QR code printed on plain paper that you can store safely.
Yes, various Bitcoin wallets support multiple cryptocurrencies.
Yes, several Bitcoin wallets claim that users can transact anonymously. However, we feel that it is difficult to achieve anonymity considering that users reveal their identity through their public addresses and that the Bitcoin blockchain records transaction details in an immutable form.
Your priorities, what you intend to do with the coins, and the amount of money you are willing to spend will determine which will be the best wallet for you. If your priority is just safety, then getting a paper wallet could be the best choice. However, a hardware wallet could be ideal for users looking for security and fast access to the coins at the same time.
This is a Bitcoin wallet type designed to be installed on your computer device–a desktop computer or a smartphone.