For a lot of people who are just getting into Bitcoin, the idea of wallets sounds a little bit confusing. After all, the whole idea of Bitcoin is to take advantage of a currency that’s not stored or traded in a physical sense, but instead exists only in a digital sense. Many might simply imagine Bitcoin as something of an online bank account facilitating digital transactions similar to when you input your credit card information to allow a money withdrawal while online shopping.
In practice that’s not unlike what happens when a Bitcoin transaction is made. However, storage is not as simple as having a single overarching account. Rather, it comes down to using a Bitcoin wallet, and where those are concerned there are a lot of details to learn and understand.
##What Are Bitcoin Wallets?
To some extent I’ve covered this by saying that a Bitcoin wallet is not unlike a bank account, at least in its functionality. But Gambling.com provides one of the more comprehensive definitions of Bitcoin wallets by explaining that they let users receive, store, and send Bitcoins to other parties, and do so by operating on several platforms. The definition goes on to explain that there are two main types of Bitcoin wallets available (though within these types there are a lot of independent options). The first type is a software wallet, which is essentially a program you can use on a computer or mobile device, providing ease of use but, some worry, a little less security. The second type is a hardware wallet, which is typically a USB device that contains the access keys you need to spend the Bitcoins you have.
There is actually a third type as well, commonly called a paper wallet, and essentially consisting of actual slips of paper with your address and private key printed on them (so that they’re not exposed digitally anywhere). However, it’s primarily different types of software and hardware wallets that dominate the market. And ultimately, they all work the same. Bitcoin wallets don’t so much store your actual Bitcoin as store the address and code you need to access and use it.
##Are Wallets Safe & Secure?
This is really up to each individual Bitcoin user to decide, as we all have different needs and perceptions regarding security. Speaking broadly, however, there is a great deal of security and anonymity to enjoy using Bitcoin wallets. Coindesk.com delved into these issues, asking if Bitcoin wallets are safe, if they’re anonymous, and how they can best be secured. In a way, the answer to each question depends on user activity.
Bitcoin wallets keep your money safe in that they protect your Bitcoin stash absolutely, so long as you don’t lose your private key and address. They’re anonymous insofar as certain software apps have been designed to allow users as high a degree of anonymity as they choose (though with all Bitcoin transactions the amount exchanged is logged publicly, and your identity is not). And they’re secure if you want them to be, in that you can back them up, encrypt them, or avoid software connections altogether and trust yourself with a hardware or paper wallet.
##What Are The Best Wallets?
As stated, we all have different needs and perceptions about security when it comes to finances, so declaring a best Bitcoin wallet would be entirely subjective. There are some that may seem more reliable than others simply because of which company designed them or how actively used they are, but there are none that are definitively “better” than the competition.
That said, there are plenty of choices to look through if you’re considering getting into Bitcoin and wondering about your wallet solutions. Toward the end of last year, NewsBTC took a look ahead at the top options for 2016, and pointed out three in particular that tend to check off a lot of the boxes people are looking for (Carbon Wallet, Armory, and Mycelium). Other similar lists point to dozens more worth considering. The best way to choose a wallet is to make sure you have a firm grasp on the function of a wallet and then spend some time researching to see which one best addresses that function from your own perspective.
That covers some of the basics of Bitcoin wallets. It’s a strange technology to a lot of new users, and it can’t fully be understood until you’re engaging with one yourself. But the wallets aren’t actually that complicated once you start using them.