It took a few years from when Bitcoin first emerged for people to truly understand that. Of course that’s not true of the small community of people who were deeply interested in it from the beginning. But most of us needed a little time to get used to the concept, understand how it works, and determine whether or not it’s worth investing in. Now it’s fair to say that Bitcoin has been mainstream for a few years. The trickier aspect of the cryptocurrency phenomenon for a lot of us to understand has been wallet usage.
If you fall into this camp – that of people intrigued by Bitcoin but still confused or uncertain about wallet options – this brief overview is for you. We’ll quickly cover some of the different types of wallets, the pros and cons for each, and a few of the tried and true options that are on the market today.
Perhaps the most traditional type of wallet out there, if you’re thinking about Bitcoin as an alternative to cash, is a hardware wallet. These are physical devices not unlike small USB sticks that actually store the information you need to access your Bitcoin. They’re essentially useless unless plugged into computer or mobile devices, at which point they allow you to access your own account via a private key, and manage your Bitcoin. The major perk of using a hardware wallet is that it allows you to keep a reserve of Bitcoins offline, which means a hack or crash of any kind can’t get to them. The downside, of course, is that you can lose the actual wallet, or see it damaged.
The primary alternative is a software wallet, which are basically programs that are available in both downloadable and web-based formats. That means you can usually access them on a computer or mobile device, via a website, desktop program, or even an app. The advantages here are convenience and ease of use. Software wallets work much like bank accounts and can be dealt with quite quickly, often with attractive and intuitive interfaces. The cons are pretty much connected to security. A software wallet can conceivably fall prey to a hacker, a virus, or even a server crash or something similar. This is always at least a slight concern, though it’s worth noting that the wallets rising to the top of the market tend to have very strong security records.
Where software wallets are concerned, there are actually a lot of good options. For 2017, a fairly comprehensive list of the most secure, trusted, and widely-used software wallets can include as many as nine or 10 options. Coinbase, Armory, Mycelium, and Electrum are the ones that seem to come up the most, and while they have subtle differences, they’re generally valued for the same reasons. They’re convenient, trusted, easy (if not downright pleasurable) to use, and effective.
The list of best hardware wallets tends to be far shorter, simply because there aren’t as many options on the market. For the most part, three tend to rise above the rest: the Ledger Nano S, Trezor, and KeepKey. All of them are effective at storing your private Bitcoin keys, and all serve the basic functions you expect from a hardware wallet. In this case, however, it’s relatively easy to pick out a best of the bunch. The Ledger Nano S has a convenient display, can manage upwards of a dozen different cryptocurrencies, and is designed to be clipped onto a keychain or something of the like for easy storage (very much like a USB device). The others are perfectly capable devices, but the Ledger Nano S does it all.
That pretty much says it all for a general overview. The decision of which type of wallet or even which specific option to choose can still be tricky. But hopefully this gives you a better idea of what these devices and programs are all about.