A Bitcoin wallet is a digital wallet where you can securely store your bitcoin. A wallet allows you to have a Bitcoin address to receive, send and store your bitcoin. There are many types of wallets where you can keep your bitcoin. The main types are desktop wallets, wallets on exchanges, mobile wallets, web wallets, and hardware wallets.
What Are Bitcoin Public and Private Keys?
Before we discuss wallets, we need to understand what keys are. There are two types of keys. Public and Private.
Your public key is what identifies your account on the network. It is similar to an email address because when someone wants to send you cryptocurrency, they will send it to this address.
Your private key is a string of 64 characters that can be generated from a 12-word seed phrase. You need this key to access your Crypto. It is used to sign transactions and to prove that you own the mentioned public key.
Custodial Bitcoin Wallets
Custodial wallets keep the keys of your Bitcoin wallet for you. These are generally exchanges that take the responsibility of securing your bitcoin for you. Some of them are Free Wallet, Binance, BitMex, Bitgo, Coinbase (Also has a separate non-custodial wallet) and Blockchain.com. They also allow you to have very little to no fees within their ecosystem.
These exchanges also come with more straightforward ways to stake, trade or spend your bitcoin. Custodial wallets might be the most accessible option for you if you are a beginner, as they are more user-friendly than other wallet types.
Non-custodial Bitcoin Wallets
A non-custodial wallet is decentralized, and you are the only one who has access to the keys to the wallet. You are fully responsible for the security of your bitcoin. Non-custodial wallets are generally considered the safest option as no third party has any control over them.
However, non-custodial wallets do have some drawbacks. They might not be the most convenient for beginners looking to trade or stake as they have fewer features and a more complicated UI. Non-custodial wallets include Exodus wallet, Trust wallet, Electrum, Coinbase wallet and Guarda wallet.
Desktop and Mobile Wallets
Desktop wallets are more secure web wallets. However, they are less secure than hardware wallets. These wallets are more user friendly compared to hardware wallets. We'll discuss some of them below.
Exodus is a beginner-friendly wallet available both as a desktop and a mobile version that can be connected. Exodus is also a multi-currency wallet that allows staking cryptocurrencies and exchanging them. It is also free.
Electrum is an open-source wallet that is available on a desktop and your phone. Electrum also includes some advanced features. However, it is not as user friendly compared to other desktop wallets. It is free.
Mycelium is a simple wallet that is great for beginners. It is a multi-currency wallet that allows you to purchase Bitcoins and other cryptocurrencies directly from the app. Mycelium is fully open source and free.
An overall well-balanced wallet that is open-source and free. It is available both on desktop and on phones. You can also buy multiple cryptocurrencies directly on Bitpay.
You can also store your bitcoin on exchanges such as Coinbase, Cashapp, Gemini, Kraken and Binance. However, these exchange wallets are custodial. This means you do not own the keys to your bitcoin if you choose to store your bitcoin in an exchange wallet.
There are also some benefits, though. If you are looking to stake easily, have lower fees, have a better user experience, and exchange cryptocurrencies, these wallets can be considered.
Paper wallets are private keys written on a piece of paper. Sometimes you may even have a QR code on them to make things easier, but if you are looking for something secure and cheap, paper wallets can be very safe.
Hardware wallets are the most secure wallets to store your bitcoin. You should have a hardware wallet if you own a lot of cryptocurrencies due to their reliability and safety. These physical wallets are also called cold wallets since hardware wallets are kept offline and are almost impossible to hack.
Hardware wallets also run a specific operating system that makes them immune to malware targeting operating systems like Windows or macOS. Your private keys also never leave the wallet, meaning they are safe even if your computer is compromised. Some hardware wallets use other security features such as pin codes and passphrases that make them even more secure.
However, these do cost money. You can expect to spend a few hundred dollars for a very secure hardware wallet such as Trezor or Ledger.
There are many types of wallets to store your bitcoin or other cryptocurrency. Unfortunately, there is no single-best wallet for all cryptocurrency users.
Fortunately, however, there are many types of wallets for experts and beginners to choose from. So, it is up to you to explore the advantages and disadvantages and choose the best fit for you.