Unsure Which Wallet to Open? Bitcoin Wallet Types and Differences

Bitcoin wallet

If you’re new to crypto trading, you should research all the possible options out there. With so many coins available on the market, it can be hard to choose a single crypto wallet to commit to and pick an account to open. Bitcoin wallet types vary in form and function, but they share a purpose: to keep your Bitcoin safe from intrusion.

Follow our guide to find out how to start trading Bitcoin, and other cryptocurrencies, quickly.

Why Not Open Bitcoin Wallet at an Exchange?

The first step towards obtaining Bitcoin is to buy them at an online exchange, a dedicated Bitcoin ATM, or have a friend send an amount directly to an existing wallet. If you want to use the exchange option, you need to find out which one is the best and has good rates and low fees. Older exchanges are most likely to be legitimate, and user reviews will often reflect that.

Bitcoin wallet

However, once you make an account with an exchange and get Bitcoin (by sending some of your fiat currency to make the exchange with), you’re better off with offloading cryptocurrency onto a private wallet.

The main reason against using exchanges as a permanent solution is the lack of data control. Since you opened an account with them, and their server stores the wallet’s keys, you have little control over the wallet itself. Even though exchanges use security protocols, the most advanced safety methods can still be pried open. Bitcoin wallet security is of utmost importance, so switching to more secure methods will give you better results.

However, an exchange wallet is an excellent way to conduct small transactions and trade between different cryptocurrencies without needing separate clients. It is especially useful for beginners and those who don’t operate with large amounts.

Private Wallets

Private wallets are the key to maintaining your cryptocurrency balance. They come in a few different types, each with their benefits and faults.

Hot Wallets

Hot wallets comprise some of the most varied and most used Bitcoin wallets on the market. They are usually always connected to the internet, or need internet access to operate properly. There are three main types:

  • Web wallets: These wallets use servers to store your data, and you can access your wallet with your information through their client from any device. While you gain some benefit fromthird-party security, and some web clients offer key backups and recovery, web wallets should always be used with caution, since keyloggers and hacking attempts can obtain your private key.
  • Desktop wallets: They install an app on your PC to store the wallet and data in. You can often use the integrated client to perform transactions. They usually have a bit more security than other hot wallet types. A desktop wallet disconnected from the internet can serve as long-term storage, although it’snot as safe as a cold wallet.
  • Mobile wallets: They use an app on a mobile phone to store information. Additionally, you can use near-field technology to make purchases using cryptocurrency. However, phones are often less safe than web clients or desktops, and getting your phone stolen means losing the Bitcoin inside.

Hot wallets are best used for small amounts, with which you can make reasonably frequent transactions and not fret about losing the entirety of the wallet due to a lack of security.

Cold Wallets

Cold wallet options are the best way to store Bitcoin and other cryptos over a long time. Since they are usually hardware options, there are a few ways someone can get them open. Bitcoin wallet safety for cold storage depends wholly on where you store it and what precautions you take to back up or move the wallet.

  • USB wallets: Crypto wallets that use USB sticks have become a popular choice due to their relative security and ease of use. Advanced models have LED screens to show current balances. However, plugging them in to conduct transactions loses a bit of their safety.
  • Paper wallets: Paper wallets are often just notes of paper with the public and private key written down. While you might not think of them as effective, they leave less of an online trail than other methods, although they are tough to use and store efficiently. You’ll also need a blockchain client to perform transactions with the wallet. Some paper wallets are one-use only.
  • Coins and cards: Some physical wallet makers provide coin- and card-shaped wallets, usually made from plastic. The keys are typically etched into the wallet and protected with a seal, making them insufficient for regular use, and more efficient as collector pieces or single-use transactions.

Open Bitcoin Wallet According to Your Needs

While there is no perfect method of storing Bitcoin, some wallets are safer than others, while sacrificing a bit of usability. While you might not be able to avoid an exchange wallet, we recommend against keeping it open. Bitcoin wallet security entirely depends on how you act after you’ve obtained your first Bitcoin, so do your research and prepare accordingly.

Author Bio: Hitesh is a digital marketing strategist and entrepreneur with more than 15 years of experience in digital marketing, start-ups, branding, and customer acquisition strategies. Hitesh is the CEO and Founder of Reposition Group, which specialises in digital growth strategies for companies in the cryptocurrency market such as Bitamp.com.