It’s hard to decide what constitutes the best Bitcoin wallet. Not only do you need to worry about choosing something with good security measures and an easy-to-follow user interface, but there are also other aspects involved such as platform compatibility, ease of access, and yes, even the support for alternative cryptocurrencies.
Bitcoin may have the highest value today but there are other digital coins rising through the ranks, which might present great investment opportunities going forward.
As scary as it may sound, especially for someone that’s new to the cryptocurrency trend, there is actually a very simple answer. If your main concern is keeping your coins safe and making sure only you can exercise control over the transactions coming out of your wallet, there is only one type of crypto wallet that does that for you.
This article will not only help you understand why a wallet is necessary but it will also help you understand why having the best Bitcoin wallet is essential. However, there’s no need to worry as we will also point you in the right direction if you’re looking for free applications or wallets that offer more freedom when it comes to connectivity.
Why You Need a Wallet
You can’t do anything with cryptocurrency unless you have your own wallet. These wallets allow users to store, send and receive Bitcoins.
They also act as a safeguard for your assets. Because any Bitcoin transaction involves two keys, one public and one private, you need to make sure that you’re the only one who has access to the private key.
The public key is what others use to encode information that they then send to you. When someone sends you Bitcoins, they make use of your public key to encrypt the data and at the same time to make sure it arrives at the desired destination on the Bitcoin blockchain.
The private key is what you use to make sense of or to decode any incoming data. Whoever is in control or gains access to your private key will have total control of your Bitcoins. This is why it’s always best to aim for the best Bitcoin wallet available in terms of security.
It’s important that you don’t confuse the idea of having the best Bitcoin wallet with having an account at a bank with the best rates. The wallet just allows you to store the strings of bits that make up your coins and your private key information. You don’t have to pay a monthly fee to have it managed nor do you get an interest rate.
You can think of Bitcoin wallets as personal safes. They keep your valuables out of reach of people that don’t know the combination.
However, unlike in real life where not everyone needs a safe, when it comes to cryptocurrencies that safe is also what allows you to perform transactions in the Bitcoin network, or any other cryptocurrency network for that matter.
Types of Bitcoin Wallets
Traditionally, Bitcoins were stored on every user’s computer of choice. You were able to download an app, generate your own address and keys, and store that information wherever you wanted to. A very popular choice after 2009 was using USB flash drives and external HDDs as offline storage options.
This trend of using a dedicated piece of hardware just for storing your keys gave birth to the first online wallets and online ‘banking’ services for Bitcoins and other cryptocurrencies. They had convincing privacy and security features and they also made it easier for users to perform transactions by using web interfaces provided by the same companies that offered the wallets.
Online wallets are still being used today, and with a great deal of success, but only if you don’t take into account the two massive security break-ins that resulted in losses of hundreds of millions of dollars in Bitcoins. Since then, the security has tightened and there are fewer reports of funds being mishandled, redirected, or plain stolen from user accounts.
That being said, a couple of years ago new products entered the market and created an even harder-to-settle debate on who has the best Bitcoin wallet. There are no longer just two or three major websites that centralize transactions and manage private accounts.
Users now have the option of going totally offline with their private keys to ensure that the risk of hacking is reduced to a minimum.
Let’s take a look at some of the best wallets today. We’ll present them to you in “chronological” order based on how they came into play and not by individual product launch dates.
We’ll explain their features, good and bad, so that you can decide for yourself which is the best Bitcoin wallet for you. Of course, we will also give you our recommendation for the best Bitcoin wallet, with no strings attached.
Offline App Wallets
As already stated, the first method of generating, storing, and managing your address and keys were simple applications you could install on your home PC. Whether you started out as a miner or you happened to be lucky enough to be one of the few lucky random recipients of free Bitcoins, you needed a place to store them.
The Bitcoin Core wallet was without a doubt the best Bitcoin wallet between 2009 and 2011. Not only was the wallet designed and developed by Satoshi Nakamoto but it was also the first of its kind.
Most of the first attempts to replicate the random number generators, security features and decryption speed on other similar apps failed.
Through the years the wallet eventually lost popularity due to more user-friendly and eye-catching apps being released. Wallets such as Electrum are better suited for beginner Bitcoin users and they also have compatibility with some of the market’s top hardware wallets.
Today the Bitcoin Core wallet is at version 0.16.0 and even though it doesn’t share the spotlight with the likes of Electrum and Exodus, it is still arguably the best Bitcoin wallet in the offline app wallets category.
In a world filled with cyber threats at every corner, one would think that storing private keys online is not a wise choice. Be that as it may, there was a time when one online wallet was considered to be the best Bitcoin wallet period. The wallet from GreenAddress used a simple authentication method and a user-friendly interface that anyone could understand.
After the very embarrassing security breaches at Mt. Gox that resulted in hundreds of millions of dollars in losses (some estimate the total to be over one billion USD at the time), online wallets became more secure. Today GreenAddress uses a multi-signature feature for confirming transactions which means that you have to manually validate them.
Where online wallets score major points is with the casual consumer base. The fact that most of them and even the best of them are free applications matters a lot to users.
For someone that only owns a few hundred bucks in Bitcoin and doesn’t have a plan for amassing a big fortune in cryptocurrencies, paying around $100 for a hardware wallet doesn’t seem like a good investment.
There’s no doubt that an online wallet is far from the hot wallet joke but it’s still far from being the best Bitcoin wallet. As tough as security gets, there are always people working just as hard or even harder at breaking new encryption software, and the fact that they’re free shouldn’t draw attention away from their flaws.
Because of this, the safest option in today’s world is to limit the amount of access someone else might have to your data, specifically your private key.
There are many devices or plain objects that were once called hardware wallets. Even printed paper with your unique private key printed on it was considered a hardware wallet at one point, even though its practicality is less than ideal to say the least.
The idea of creating dedicated offline hardware wallets came in part from the many Bitcoin users that relied on USB flash drives or other external storage devices to store their offline app wallets. While they were not really safer than just storing on the main computer, they did allow users to unplug them whenever they weren’t doing transactions. Thus, they were limiting the amount of time someone could spend trying to hack private keys.
Today, and for a long time running, the best Bitcoin wallet in terms of security is TREZOR. It was launched back in 2011 and has undergone some visual remodeling but even though it’s not the coolest-looking one, it is unmatched in its security performance.
TREZOR has a simple user interface that involves a screen and two buttons. It can be used to generate both the public key and private key and it uses a variety of authentication features. You can customize it to be as simple or as hard as you want it to be.
TREZOR has both the ability to use PIN codes and passphrases before granting access to your funds and before approving any outgoing transactions. You can even set different limits for different passphrases. TREZOR uses a limited USB connectivity protocol when it’s connected to a computer.
It only allows enough bandwidth for transactional information between the computer and the wallet so that you can use it on any device at any point in time. This lets you use TREZOR even on unsecure networks or malware-infected PCs without risk and interference.
You may be asking yourself: “How can this be the best Bitcoin wallet if it doesn’t come for free like online wallets and offline app wallets?”
The fact of the matter is that nothing good comes cheap and when it comes to cybersecurity this is unlikely to change. All things considered, a TREZOR is just slightly above the $100 price range which doesn’t seem like a steep price to pay for the security of your Bitcoins.
Keep in mind that this has been the best Bitcoin wallet since 2014 and even after two iterations of the Nano and Nano S, the Ledger is just better-looking but not more secure.
There have been no reports of private keys being compromised on hardware wallets so far and it is unlikely that that will ever happen to physical connectivity devices. There are hardware wallets that use Bluetooth to connect to other devices which does cause them to be more vulnerable.
Mobile wallets are commonly classified as offline wallets, but considering that everyone is online on their smartphones these days you can hardly make the offline argument anymore. The reason why companies started making mobile-specific wallets is because the traditional offline wallets would only work with Windows, Linux and Mac OS.
Because of the different programming languages, you will need a different wallet depending on your phone’s OS. Here are the best Bitcoin wallet choices for all your favorite brands of smartphones.
Bread Wallet is perhaps the most popular wallet for iPhone users. Even if it’s not, it still has something else going for it.
It is the most secure for iOS mobile devices which is what makes it the best Bitcoin wallet in this category. It is easy to use and the installation process and key generation are done in record time.
These days Bread Wallet is enjoying some success on Android devices also, although it has a long way to go before the Android version matches its reputation on iOS devices. One thing is sure, Bread Wallet is not going anywhere for a long time. If anything, it just seems to be getting more and more ahead of its competition.
Here is where things get tricky. On the one hand you have Mycelium, the open-source platform with great security features that easily makes it the best Bitcoin wallet for Android devices. However, there is a catch. Mycelium only has support for Bitcoin.
Although we’re talking mainly about the best Bitcoin wallet, it does say a lot when a piece of software can’t incorporate enough security features and solve compatibility issues for other cryptocurrencies. It does a great job for Bitcoin users but it does leave us wondering why it’s so basic to this day.
It also supports the best Bitcoin wallet in the hardware department, TREZOR, and its runner-up the Ledger Nano S.
GreenBits also has a good reputation as it was developed by the same team that brought us GreenAddress. They never had any major security flaws in their online wallet and so far everyone seems more than pleased with the mobile version too.
A Special Mention
While it may not be the best Bitcoin wallet, the Bitcoin Wallet deserves a quick mention at least for historical recognition. This was the first mobile cryptocurrency wallet ever and to this day manages to keep up in terms of security protocols and encryption.
However, due to a lack of eye-catching features and an oversimplification of the user interface, it looks more like an introduction to wallets than an actual mobile wallet. Nevertheless, if you’re one of the few that still has some funds lying around in an old Bitcoin Wallet, there’s no real reason you should hurry to make a switch.
Bitcoin Banks, Exchanges and Online Storing
A very common misconception these days is that services such as Coinbase and Coindesk are online wallets. These companies actually take on the role of a bank more than that of a personal wallet. Here’s what you can expect from exchanges.
They allow you to use an online platform to send, receive and exchange Bitcoins and other altcoins in a variety of popular currencies and between each other. The transactions are completed quickly and you’re always up-to-date on rates. You can almost look at it as a type of stock exchange for flipping cryptocurrencies.
You can store your coins in your Coinbase account for instance, as it will allow you to take part in transactions faster. You can also choose to withdraw the coins into another wallet at any point, which is what most experienced Bitcoin traders recommend.
It’s not that cryptocurrency exchanges don’t have easy-to-use wallets. It’s just that none of them can offer you the best Bitcoin wallet as far as security goes.
Furthermore, keeping your Bitcoins in the wallet that comes with an exchange service is a lot like walking around with a ‘kick me’ sign on your back. These services are always at the top of any hacker’s list. This means that even though it may be hard, chances are some people are going to lose some coins at one point or another.
Although massive thefts like the ones at Mt. Gox and Bitfinex (which are both cryptocurrency exchanges) have not happened in recent times, small intrusions are not uncommon. Especially now with the high market value of Bitcoins, exchange services with online wallets such as Coinbase are very juicy targets.