Key takeaways:
- A bitcoin wallet’s security, interoperability, and interface design are essential features.
- A good bitcoin wallet has to be safe and easy to use.
- A wallet can also have privacy and interaction with other networks.
- Some wallets offer you custody services, and others handle the money yourself.
- Your wallet choice will depend on whether you want to access your money on a PC, cell phone, or hardware.
- Wallets like Trezor offer security, while Exodus allows you to store multiple currencies.
A wallet is one of the most used applications when you have savings in bitcoin. After all, these devices serve as storers of an address’s private and public keys on the network. Through the wallet, the owner of said address can access the registered cryptocurrency balance and spend it as best suits him.
Due to the importance of wallets for interaction with digital money, it is the main responsibility for users to know what type of wallet is best for them and how they can choose one that suits their capabilities. This article compiles some of the infallible questions you have to ask yourself when choosing a bitcoin wallet.
Why does a private key matter?
One of the most essential elements for the security of a cryptocurrency wallet is its private key. It is the cryptographic code that allows the user to sign all the money operations that he performs. That is, it is the element that gives you control over your money.
Therefore, this is a question that we have to ask ourselves when choosing the wallet that best suits us: Do I want to have a wallet with custody or not? The answer will depend on how open you are to the idea of managing your money single-handedly or delegating that responsibility to a third party.
The private key is generated when creating a wallet; in some cases, the user is the only one who has access to it. These types of wallets, which give complete control of the wallet to its owner, are known as non-custodial applications. The name is because no company or person, not even the app developers, has the power to enter the wallet.
Undoubtedly, a self-custody wallet has its advantages in terms of security. That you are the only one who has access to your money gives you the responsibility of taking care of your savings, as well as the right to be the only one who makes decisions about your money. In other words, it turns your wallet into a form of money storage that is resistant to censorship and theft.
Cryptocurrency wallets, after all, are applications that allow us to access our money. Due to this, it is key that these devices have the possibility of making backup copies with which it is possible to access the funds in cryptocurrencies, even if your computer was damaged or you lost your cell phone where you had downloaded the app.
One point to note is that the copies should be automatically encrypted by the application. Also, the recovery process should be easy to perform. The fewer steps, the better. For example, we can re-download the app on another device using a seed phrase and import the wallet using the recovery words.
The key to your bitcoins
A seed phrase is a set of between 12 and 24 words that legibly represent the private key of a Bitcoin network address. In a few words, it is like a decoding of the random string of numbers and letters that represents access to your money on the network.
Some wallets that offer self-custody services are Electrum, Bitpay, Trust Wallet, and Wasabi.
Trust Wallet and Bitpay are two wallets that can be downloaded to mobile phones and offer self-service services.
However, if you still believe in the “old-fashioned” process and prefer that a company secure all of your money, then you should investigate how the security systems of the wallet you want to use work.
How strong is the security of your bitcoin wallet?
As we have said before, a wallet’s level of security is one of its key characteristics to know if it is convenient for you to use it or not. Because it is the element that will keep your capital safe, it is a point that cannot be taken lightly, especially if you plan to delegate the protection of your assets to the administration of a third party.
Suppose it is a wallet with custody, also known as centralized, because access to cryptocurrencies is shared by the user and the company. In that case, it is important to know what security protocols are used to keep the private keys of these wallets safe.
In general, these types of applications keep their users’ cryptocurrencies in a series of addresses or physical wallets to which they have complete access. In this sense, if the company does not take measures to protect its servers from possible hackers or loses the hardware devices where its clients’ money is stored, your capital is likely in danger.
Always investigate, do not trust
It is essential that all wallet users know how their money is managed and investigate all the details of how it is stored on the official website. One of the advantages of having a wallet that offers custody is that you can leave your money in the hands of someone more expert in cybersecurity. However, this can also be a double-edged knife: trusting someone else exposes you to their mistakes and possible bad intentions.
On the other hand, it is also important to know if the platform has specialized functions to reinforce the security of your keys on the user side. For example, the mandatory use of double-factor authentication (2FA) to access your wallet balance is a tool that can give your assets more thorough protection.
Among the best-known centralized applications, whose security has maintained good standards, are BitGo which offers services to companies and institutional investors, and Coinbase Custody, a service offered by the American exchange of the same name.
In the case of non-custodial wallets, such as hardware wallets or desktop applications, it is essential that when generating a wallet, the seed phrase is created offline from scratch. If for some reason, your seed is exposed to third parties in the process of assembling or creating the wallet, then the security of all your capital will be exposed, and someone else could have full access to your money. Be careful with this detail!
Why you may consider going hardware
Hardware wallets are considered one of the safest wallets on the market. Source: Trezor.
Also, since it is a service that you will provide to yourself, you have to be the one to take the measures to insure your assets. For example, not sharing your seed phrase with third parties on the Internet or in person is one of the main tips to keep in mind. Also, you must save your seed phrase in a safe place to which you have access and cannot lose it because if you forget it you could have problems accessing your wallet.
How simple is it to use your cryptocurrency wallet?
If you are a newcomer to cryptocurrencies, then one of the features that your first wallet should have is that it is simple to use. A user-friendly interface can make a difference when it comes to sending bitcoins since not understanding the functions and not paying enough attention can make a mistake and lose our money forever.
When selecting our wallet, it is vital to analyze the application’s design to see if we know how to use it. Likewise, it is crucial to know the amount of funds they can work with since some companies only allow partial withdrawal.
Less is more when you take your first steps
If you are about to download a wallet with multiple features and the ability to customize your transactions, then you should think twice. Although these types of applications are usually highly convenient when sending or receiving BTC, they can also be cumbersome and difficult to understand for a novice user.
The focus should be that when you browse the wallet you can get all its functions quickly and without confusion because an error can expose your money and even make you lose it forever.
If you are looking for simplicity, some of the wallets on the market with the most intuitive designs are Bitpay and Electrum, both of which are easy to navigate.
How many functions should your bitcoin wallet have?
On the contrary, if you already have some basic knowledge about cryptocurrency wallets and are looking for an app that fulfills all your wishes, then a multi-service wallet is probably the most suitable for you.
It is not a mandatory element, but the fact that some wallets offer their users additional functions other than managing funds can make it easier for them to interact with your capital. For example, suppose you want to have an extensive portfolio of cryptocurrencies and are interested in exchanging between assets in a hurry. In that case, you may get more out of an application incorporating such a service.
Other users may find it helpful that their wallet allows them to make more private transactions, buy assets with fiat money from an affiliated bank or credit card, or that it allows them to modify the commission to be paid for each transaction.
Multiple options for various users
Every user has their ideal wallet. Before you download or buy one of these cryptocurrency wallets, you should ask yourself: What services do I need to make my transactions as easy as possible? Some will say that they want to store more than one cryptocurrency in one place, so they will have to look for a multi-supported wallet. Others, on the contrary, will be looking to gain more privacy in their transactions, so those applications with mixer or Coinjoin services will be convenient for them.
If you are interested in using cryptocurrencies to manage family or business finances, you may also need a wallet with additional multi-signature features. This option, in short, allows a user to enter more than one password in their wallet when approving a transaction.
In this way, it is much more complex than a third person can access the wallet funds without the owners’ prior approval. The multiple passwords that the wallet will have can be stored on different devices or places to increase its security. So this feature is widely used when it comes to protecting cryptocurrency funds from hackers or malicious users.
Exodus could be a good option if you want a wallet that allows you to store multiple cryptocurrencies. On the other hand, if what you are looking for is security and privacy, applications like Wasabi Wallet or Samurai Wallet are the most prominent on the market.
Do you want to have control over the commissions to be paid?
It is not exactly the first question that comes to mind when choosing a wallet. However, it can be crucial when trading daily with bitcoin. Every time we make a capital transfer in the cryptocurrency network, we must pay a commission (also known as fees in English) to the miners in order to give priority to our operation and finance the activities of all those who process transactions.
In addition to serving as an economic incentive, a commission is used by users to indirectly communicate to miners how urgently they want to send a payment. If the transaction is highly urgent, a high fee may make miners prioritize it. You can set up a cheap commission if your payment can be processed slowly.
Some wallets allow you to manually configure how much you want to pay the miners to process your transaction and calculate an approximate amount of what you should cancel if your payment is urgent.
A few wallets that give you complete control over the commissions to be paid are Bitcoin Core, which is one of the first on the market. Electrum, which we have already mentioned before for being self-custody, and Specter, which is compatible with Linux, Mac, and Windows operating systems.
What operating system is your wallet compatible with?
In a market as broad as that of cryptocurrency wallets, some applications adapt to the needs of each user, this is the case of operating systems. Not all apps are available for any type of computer or cell phone, so you will have to look for those wallets that offer support for your smart devices.
Generally, this information is available on the websites of the wallets, where you can check if the wallet of your choice can be used on your computer without falling for a scam or malicious link.
Beware of scammers and hackers!
When you download a wallet on your phone or computer, we recommend you look for the links directly from the company’s official portal since hackers on the Internet upload malicious applications to online stores. Also, if you want to buy a hardware wallet, buy it only at the company’s official store.
If you have an Android phone, some of the wallets you can download are Eclair, Edge, Bitpay, and Mycelium. If, on the other hand, you are an Apple user, you can also try Bitpay or Edge, but also with applications such as Bither and Unstoppable.
Check social media
If any wallet does not work well or has defrauded its customers, you will find comments on social networks denouncing this irregularity. On the contrary, if the wallet is up to the users, many people will recommend its use.
That is why, if you want to start using a specific wallet, we recommend you browse different blogs or internet forums to find the opinions of experts or users on the matter.
