All The Different Types of Bitcoin Wallets

There are several types of bitcoin wallets. They are Bitcoin Core software wallets, hardware wallets, paper wallets and web wallets.

 

Issues With Software Wallets and Hardware Wallets

The issue with Bitcoin Core software is that the software is quite large. It contains a record of all bitcoin transactions since the inception of the bitcoin network in 2009. As of November 2017, the software is over 140GBs in size. This means that if you want to install a wallet on your computer, it will take you some time to download it and install it. You also need to have sufficient space on your hard drive. When you do install the software, it is a good idea to have a backup, but because of the size, the only way you can have a backup is if you have an external hard drive. You could use DVD or Blu-Ray disks, but because of their limited capacity backing up the entire database on the discs would take a lot of time, making this option not very convenient from the practical standpoint.

Hardware wallets offer more security compared to software wallets, but to use them you need to have the hardware with you and to plug the hardware into the computer or some other device connected to the Internet.

bitcoin wallet

 

Why Web Wallets

Web Wallets solve the problems that come with software wallets and hardware wallets. With a web wallet, you do not need to allocate a lot of space on your hard drive. You also do not need an external hard drive for backups.

The benefit of web wallets over hardware wallets is that you do not need to plug anything into any of your devices. You can simply log into your account and start using your bitcoins.

 

Potential Issues With Web Wallets

One of the main ideas behind cryptocurrencies, including bitcoin, is the idea of letting people control their money and send and receive payments directly, without a need for any third party.

When you use a web wallet, you are using a third party, which is why you need to be very cautious about web wallets. In the past, there have been web wallets that ceased to exist and their customers have lost the bitcoins that they were storing in their wallets. One such example is a bitcoin exchange called Mt. Gox, which suddenly stopped operating and closed in 2014.

Bitcoin is a decentralized system, which means that when something like this happens, you don’t have a place you can call or send a message to try and fix things. When your bitcoins are gone, they are gone. Because many countries are still developing regulations in regards to bitcoin and other cryptocurrencies, going to the police when you lose your bitcoins may also not work out. In some areas, the police don’t know anything about cryptocurrencies and will not even understand what you are talking about.

 

How to Choose A Web Wallet

When you choose a web wallet, pay attention to the reputation of the company and the fact about how long the company has been around. Ideally, you would like to learn the names of the people that run the company. This way, if the company stops operating, you will know who was behind it.

Finally, pay attention to the country of registration of your bitcoin web wallet. You want to deal with companies that are registered in countries such as the United States and the United Kingdom. These countries have strong legal systems and financial systems with long histories. If a company has registration in a tax heaven with few regulations, keeping the company accountable or finding the people behind the company may be almost impossible.

Companies that offer web wallets can be divided into three groups: bitcoin exchanges, dedicated wallet services, and mobile wallets.

 

Bitcoin Exchanges

Bitcoin exchanges are businesses that enable customers to trade their bitcoins for other assets, such as other cryptocurrencies and conventional fiat currencies. There are all kinds of bitcoin exchanges. Some of the exchanges are online exchanges. Others have brick-and-mortar locations. Yet others allow customers to exchange payments in all forms, including traditional ones and cryptocurrencies. Some exchanges like to hold some of the coins to allow them to take advantage of the fluctuating exchange rates. While this can be convenient and profitable, for the reasons explained above you should be very careful with trusting a third-party with your coins.

 

Dedicated Wallet Services

The difference between dedicated wallet services and exchanges is that wallet services do not have an active trading platform. You can use them to buy and sell bitcoins and other cryptocurrencies, but often the price doesn’t change as frequently as it does on an exchange. Examples of web wallets include companies such as Coinapult, Green Address, BitGo, and Coin.Space. These services allow users to use functions such as sending and receiving payments in bitcoin by text messaging or email, two-factor authentication and access to the wallet via a remote app.

 

Mobile Wallets

Mobile Bitcoin wallets are similar to regular mobile wallets in that they allow access to the wallet from multiple mobile devices. There are mobile wallets for Android, iOS, Windows Phone, and Blackberry. Mobile wallets have the lowest level of security compared to other wallets because people often break or lose their mobile devices. It is also much easier to steal a mobile device that it is to steal a full-size desktop computer. If you keep your bitcoins in a mobile wallet, it means that the wallet contains your personal key and if something happens to the key and you have no backup, you will lose your coins. Some of the popular bitcoin wallets as of the writing of this article are MyCelium, BreadWallet, Copay Android, and Simple Bitcoin.

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