How to Get a Bitcoin Wallet

profileCarly DeBeikes | March 23, 2022
how-to-get-a-bitcoin-wallet

This is not intended to constitute investment or other advice. All forms of investments carry risks.

Bitcoin wallets come in a few different types: desktop, mobile, web, and hardware. In order to begin trading Bitcoins, a person has to start with a wallet. Most exchanges generate a wallet for each user, but for peer to peer transactions each user must have a wallet already created.

What Are Bitcoin Wallets?

Bitcoin wallets are also known as digital wallets that are used to send and receive Bitcoins. Similar to a physical wallet that stores currency, a Bitcoin wallet stores information used to access cryptocurrency.

As with all things Bitcoin, a Bitcoin wallet is not a physical item. It is a software program that can interact with the Bitcoin blockchain. The wallet accomplishes this by generating unique addresses, also known as public keys, which is a public address the user can share to other parties for transactions. The public key is the address of the wallet that the user generates, and by sharing the public key they now can receive bitcoin to that wallet.

Underneath the public key, is the private key, which is an encrypted file used to control the bitcoin in the wallet. If a user loses their private key they risk losing their entire amount of bitcoin held on the wallet. If a private key is stolen or compromised, the recipient can take over the wallet and the original user could risk losing all of their funds.

How do you backup your Bitcoin wallet?

You should always have a backup of your private key. Each wallet will generate a private key for you upon creating a new address. The “backup” usually is a string of 12 or more unique words (also known as a “seed phrase”), in a specific order, which should be written down on a piece of paper and held in a secure location.

A seed phrase, seed recovery phrase or backup seed phrase is a list of words which store all the information needed to recover Bitcoin funds on-chain. Wallet software will typically generate a seed phrase and instruct the user to write it down on paper. Some users may opt to not write it down but rather type in a secure encrypted document.

Regardless of how you decide to store the unique seed, not having access to this information puts you at risk of losing access to the funds. Therefore, it is strongly advisable to keep this information written down or stored somewhere secure when you’re setting up your wallet.

4 Types of Bitcoin Wallets

Bitcoin wallets can come in many different types, but the four main types are typically  desktop, mobile, web, and hardware.

A desktop wallet is typically an application downloaded and saved on a user's computer. In most cases the desktop application references an encrypted file containing the private key of the bitcoin wallet.

Users opting for a desktop wallet should ensure their private key file is encrypted, and that the computer itself is not connected to the internet. Most desktop wallets encrypt the private key automatically, however each user should make sure that is the case.

Desktop wallets might be beneficial for new or inexperienced users because the private key is encrypted and stored on the computer itself, making the risk of losing the actual private key less viable. Desktop wallets can also be susceptible to hacks if the computer is stolen or compromised in any way.

Similar to the desktop wallet is the mobile wallet, which performs similarly. Mobile wallets differ in that they often use a QR code or NFC (near field communication) technology to facilitate payments.

Mobile wallets can be used in physical stores, and it is how the “touch-to-pay” system works. Mobile bitcoin wallets are compatible with both iOS and Android devices, and can be downloaded from respective app stores.

One of the risks of using mobile wallets is that many malware apps pose as wallets, so users should do extensive research before downloading and trusting them with their financial information.

Web and Hardware Wallets

A web wallet is one that allows access to Bitcoins from either an internet browser or mobile device. There is also an element of risk with web wallets because they store private keys online and can be susceptible to being hacked or leaked. Most bitcoin exchanges generate web wallets automatically for their users upon signing up.

Finally, hardware wallets are the most secure forms of Bitcoin wallets because they store their Bitcoins on a physical peripheral (like a USB drive) that is plugged into a computer. By storing the private key on a physical device, it is least susceptible to being compromised because it is rarely connected to the internet. Instances of Bitcoin theft are much lower with hardware wallets than they are with mobile and web wallets.

While most Bitcoin wallets are free to download, hardware wallets come with a price tag between $100 to $200. Users should also ensure that the hardware wallet is coming from a trusted vendor, and not a third party or un-verified reseller.

Desktop and web wallets can be downloaded from the websites of the respective companies. Those that offer hardware wallets will usually have some kind of “products” section on their website for users to choose the kind of peripheral they want.

Which Wallet Is Right for You?

Which Bitcoin wallet you should get is a personal choice based on your comfort level and how secure you want it to be. Every wallet should have a strong password, and users should consider storing their Bitcoins offline (also known as cold storage) to avoid getting hacked.

Users who have desktop and mobile wallets should back up their wallets often. Issues with the software—either on the desktop or mobile versions—could delete their holdings.

People who intend on doing a lot of cryptocurrency trading, and thus have many crypto assets, would best use a combination of hot wallets (online storage) to trade quickly and cold wallets (offline storage) to protect the majority of their Bitcoins.


References

The Best Bitcoin Wallets for Storing and Securing Your Cryptocurrency. (June 2021). Insider.

The Private Key-Loss Conundrum. (October 2020). Medium.

What Is a Bitcoin Wallet? (June 2021). Forbes.

This Elusive Malware Has Been Targeting Crypto Wallets for a Year. (January 2021). Coindesk.

What’s the Best Bitcoin Wallet? (February 2021). US News & World Report. Bitcoin Wallet: How to Choose the Right One for Your Cryptocurrency. (March 2021). Nerdwallet.

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