Bitcoin Wallets Explained
To trade bitcoin or other cryptocurrencies, Bitcoin wallets are essential. Also, you must understand what wallets are, and the different types available – we discuss this in the below guide. This is essential reading before Buying Your First Bitcoin.
Bitcoin is a virtual currency. As a result, its storage method differs from traditional fiat currencies. There are no banks that you store it with and as its electronic, you cannot stuff it under your Enter the bitcoin wallet. A bitcoin wallet is how bitcoin is accessed, stored, sent, and received. Also, these wallets come in many forms including mobile, desktop, paper, and hardware versions.
For security, a bitcoin wallet has a public wallet address, and a private key. You use the private key to access your public address and connect to the bitcoin network. A key is similar to a bank account password. However, it is usually presented as a random 12-word passphrase.
This key is your only method of accessing your bitcoin wallet. Also, if something happens to your wallet, providing you have the key, you can still recover it and access your bitcoin funds.
Are Bitcoin Wallets essential?
You can use a bitcoin exchange to store your bitcoin. However, this leaves the Bitcoin in the hands of a 3rd party, who could be susceptible to being hacked. This leads us to the golden rule of Bitcoin storage and security:
For buying Bitcoin through FIFO Bitcoin’s payment partners, you will need to set up your own personal Bitcoin wallet first. This might sound intimidating, but its actually very simple. In the sections below, we look at the different bitcoin wallets available. This includes mobile, desktop, hardware, and paper wallets.
Also, regardless of the type of wallet, you receive a private key. This is essentially your wallet’s password. To complete a bitcoin transaction, your private key matches with a public key and allows the transaction to proceed/connect you to the other bitcoin user. In all cases you will need to write down the 12 word private key so you can back your wallet if you lose your phone, laptop or hardware wallet.
Pros of using your own Bitcoin wallet
- Offers improved security compared to leaving your assets on an exchange.
- Accessibility: Greater accessibility and control over your bitcoin.
- Convenience: Convenient to use and a simple transfer process that allows you to send and receive bitcoins by scanning a QR code.
Cons of using your own Bitcoin wallet
- None! The only area that you need to look at is which Bitcoin wallet is best suited for you. For example, some variations of laptop or PC Desktop wallets are not the safest option for holding large amounts of Bitcoin.
- Exodus is a quality cryptocurrency wallet for iOS and Android mobile devices. Exodus has an easy to use interface and allows for multiple crypto currencies as well as Bitcoin. Moreover, the app is simple to setup. All you have to do is download from the relative store, and you can be up and running instantly. We highly recommend watching the below Exodus video demonstration here:
Different Types of Bitcoin Wallets
Desktop and Mobile Phone Bitcoin Wallets
- Completely free and simple to create.
- Accessibility: Easy to access as you access the wallet from your smartphone or computer.
- Convenience: Convenient process as you can use QR codes to exchange bitcoins.
- May not be secure enough to store large bitcoin quantities. Harware wallets are best for this.
Exodus is a quality bitcoin desktop wallet. Also, it offers great security and ease of use.
Physical Hardware Bitcoin Wallets
We recommend hardware wallets if you have $10000 or more in bitcoin.
- Security: This is the most secure wallet available. Also, they protect from viruses, malware, phishing, and other hack attempts.
- Portability: It is portable and you connect it to any MAC, Windows, or Linux device like an external HDD.
- Extensibility: A hardware wallet is also compatible with different wallets like Mycelium and MultiBit HD.
- Price: They are not free like desktop wallets.
The Ledger Nano S TREZOR is a quality hardware wallet and gives top security and a simple usage process. These can be purchased from Ledger’s Australian distribution partner Coinstop.
Paper Bitcoin Wallets
A paper wallet is the most secure way to store cryptocurrency. Also, this wallet is completely offline. As a result, you have full control. Also, a paper wallet is essentially a piece of paper that contains your wallet address and private keys.
Also, it is often printed as a QR code. However, as it is a physical item, you must store it securely and protect it. For example, you could laminate the paper, or place it in a safe or tamper-proof envelope.
- Offline: Completely offline and thus protected from online threats.
- Fragile: Paper is fragile and can easily be destroyed or lost.
- LImited transferability: You can only transfer the entire balance of the paper Wallet at one time.
How Can You Keep Your Cryptocurrency Safe in your wallet?
- Backup your private keys. Regularly back up your private key on an external device. We reccomend using a piece of paper, but if need be a USB stick or external HDD, as long as they are kept offline. This acts as a failsafe from fire, theft, or damage. Please see our below video on “Not Your Keys Not Your Bitcoin” from Andreas Antonopoulos – Essential viewing!
- DO NOT TAKE A PHOTO OF YOUR 12 WORD PRIVATE KEY AND DO NOT SAVE IT IN A DOCUMENT ON YOUR COMUTER, THIS IS THE FIRST THING HACKERS LOOK FOR.
- Never make your Bitcoinwallet info public. Never give your private key to anyone! As a result, if you do this, is it the equivalent of giving someone your bank pin!
- Generating keys for Hardware Wallets: When you generate a private key for a hardware wallet, only do so in a secure offline environment.
- Keep software up to date for desktop wallets: Always update your desktop/mobile wallet software. This ensures you have the latest security features.
Disclaimer: Any recommendations given are purely our opinion. We take no responsibility for damage or loss if you use one these products