A Bitcoin wallet is like your everyday wallet or purse, but digital. With these digital wallets installed in your mobile phone, tablet or computer you’ll be able to access your money in Bitcoin form, which you can spend on purchases, transfer to other users, receive or exchange for dollars.
There are wallets for any operating system and device, you only have to access its creators page and download the application or do it from the App Store or Google Play.
- 1 How does a wallet work?
- 2 Steps to create a Bitcoin wallet
- 3 Alternatives to opening a wallet
- 4 When you want to pay for your purchases
- 5 Phone Wallets
- 6 Computer Wallets
- 7 Multiple Cryptocurrency Computer Wallets
- 8 Web wallets by browser
- 9 Universal Wallets
- 10 Hardware or physical wallets
- 11 Having a paper Bitcoin wallet
How does a wallet work?
Speaking about the more technical part, a wallet allows you to access the blockchain, create your own private passwords and digitally sign any transactions you make. These passwords would actually be the representation of your Bitcoins, because if you them backup, you’ll be able to take them with you and access your money from any other wallet you wish to install.
Since every transaction goes directly through this codified public record or blockchain, where each transaction has to be validated by the community, it doesn’t matter if your wallet is off when you receive a transfer. As soon as you connect it, it will update and show you your new balance.
Steps to create a Bitcoin wallet
I’d like to mention, that in addition to the wallets that we can install on mobile or desktop devices, there are others such as physical or hardware, and paper or offline. But the most used ones are those that work on computers, tablets or smartphones, so let’s see an example:
Creating an account in Coinbase
Here, I’ll tell you how to install Coinbase, which is completely free and one of the best applications I’ve ever used.
You can use this wallet from your web browser or download the mobile wallet application and install it on your Smartphone or tablet, be it Android or iOS.
To do this, you only need to sign up and open an account, as in any other service they’ll ask you to enter your name, email address and you will need to choose a password. See the image to the right.
You also have the opportunity to earn bitcoins for free if you sign up and then recommend coinbase to your friends! Follow the link below to get started.
- Signup Earn $10
Once you have entered your details you will find yourself at the coinbase dashboard, as shown below.
You will be asked to verify your account. This includes sending in a copy of a form of identity (passport, driving license or ID card) and a proof of address (utility bill, tenancy agreement or bank statement).
You will then need to decide a payment method. For non US citizens, you have two choices; credit / debit card or wire transfer. For those living in the US, you have a further option of using Paypal. This is soon to be rolled out worldwide but currently only available in the US.
Once you have added a payment method, you can click on ‘Accounts’ and generate a bitcoin wallet address.
- Think about a strong password, don’t use something simple that you’re already using for your email account or other service.
- Write down your password, as there’s no way to retrieve it.
- Create different addresses so that others can send you money while maintaining a greater anonymity.
Alternatives to opening a wallet
One of the issues with holding your cryptocurrency in a wallet is that all wallet providers are not regulated and hence puts your money at more risk than when you deposit into a broker account.
Brokers like eToro are a great way to invest in bitcoin without an extra layer of security for your funds. There is even talk about them opening their own crypto wallet, which would make the process even safer whilst also be able to own the underlying asset.
When you want to pay for your purchases
Its even easier than paying with your credit or debit card, since you only need to enter the recipient’s address and the amount you want to send them. Most wallets also offer the option of generating a QR code which the other person can scan, or you can even connect both terminals and do the translation through NFC.
Even though you can access your Bitcoins from your home computer and shop from there, one of Bitcoin’s main advantages is precisely its mobility. If you have a smartphone, you can take your money everywhere and check your wallet at any time. You can receive money and use it anywhere, paying with your phone is very easy.
Any device that works with Google’s operating system has a very good Bitcoin wallet version, but here I’ll only mention the top three:
Other applications such as Xapo, Airbitz, Mycelium are also very safe and easy to use.
Wallets for iOS
If you have an iPhone, iPad or even an Apple Watch, you’ll also find several options from where to choose the best wallet. I’ll especially talk about the safest one, and also the most intuitive and simplest to use:
These applications are installed on your laptop or desktop, and with them you’ll be able to access your Bitcoins and are generally designed for people who won’t use them on a daily basis, and who want their bitcoins to be stored in a safe place or just use them for buying and selling, as an investment. All the applications shown below work in Mac OS X, Windows and Linux:
Multiple Cryptocurrency Computer Wallets
Most wallets will hold bitcoin nowadays. Due to its size and growth most wallets that offer multiple coins do let you store bitcoins on them. The wallets that allow you to store many coins are becoming more and more popular. Lots of users now find more comfort in wallets that you can download onto your computer, the two below are great examples of wallets that are both downloadable and hold multiple cryptocurrencies.
Web wallets by browser
Many of the wallets I’ve talked about have a web version, and from it you’ll be able to make any type of transaction you want. From shopping, selling and buying Bitcoins to making transfers.
Coinbase, Bitcoin Wallet, Blockchain or Xapo, are great examples of online wallets, which you can also use on their mobile versions. The good thing about a web wallet is that it doesn’t take up space on your computer and if you have Internet you’ll be able to access it from anywhere in the world. The downside is that your information will be stored on the network which means less control.
These are truly universal, you can use them with any portable or desktop device and they’ll work on any operating system:
This is an open-source wallet, with multi-signature HD that comes from BitPay. It allows you to share access with several users or handle multiple wallets without jeopardizing you security, and it’s completely translated into English. You can use it with iOS, Android, Windows Phone, Chrome, Mac OS X, Windows or Linux.
Hardware or physical wallets
These are mini computers that you can use offline, to store and manage your private passwords or pay with your Bitcoins offline, which means increasing your security to the maximum. Therefore once you’ve stored your passwords in the hardware, you’ll be able to sign for Bitcoin transactions without being connected to the internet.
The negative aspect of these gadgets is their price, several models cost about $100.
This would be the ultimate hardware wallet. If you don’t feel safe with your computer or internet connection and want to keep your Bitcoins safe, Trezor offers you the option of saving your private passwords and making all kinds of transactions offline.
You can use it in Windows, OS X or Linux, and it’s compatible with several wallets, such as: MultiBit HD, Electrum or Copay.
Having a paper Bitcoin wallet
The Bitcoin system and the cryptography on which it is based is very safe, but in matters of security, usually the weakest link is precisely us and how much interest we give to our computers and mobile phones’ security.
Therefore, an offline generated paper wallet, is like having a practically 100% safe anti-theft insurance, which will protect us from being attacked by viruses, malware or keylogger. Once the paper wallet is generated and printed, we’ll have our Bitcoin address and associated private passwords on a sheet, expressed in two QR codes.