Bitcoin Wallets - Become An Expert
With so much buzz swirling around Bitcoin, it can be challenging to wade through the surplus of information to find reliable facts on Bitcoin, safely use it, and how to wield it. An essential tool to using Bitcoin is through a Bitcoin wallet, which will allow you to store, transfer, and receive Bitcoins.
In this article, we'll tell you all you need to know about your Bitcoin wallet. From how to choose the best one to how to make it secure, we'll cover every detail to set you up on the path for success.
What Is A Bitcoin Wallet?
Since its introduction in 2009, many people have been fascinated with buying Bitcoin, buying stocks with Bitcoin, and diversifying their economic portfolio with cryptocurrency.
If you've already joined the millions of other crypto-savvy investors, chances are you're already well-versed in what an online crypto wallet is.
If you're a new investor and are green to the world of Bitcoin, a Bitcoin wallet is similar to a physical wallet because it is how you access your funds.
However, unlike a physical wallet, a Bitcoin wallet holds digital currency. It's important to note that a digital wallet store the keys and information to access and store coins, but it doesn't hold the coins themselves. Some Bitcoin wallets can even hold more than one type of digital currency.
There are many different types of Bitcoin wallets available to choose from, all of which we'll go over in detail, so you're well-versed on the benefits and drawbacks of each kind of online bitcoin wallet.
How Do Bitcoin Wallets Work?
Possibly a more accurate metaphor than a wallet, your Bitcoin wallet may be more similar to a keychain. Your wallet holds multiple pairs of both private and public keys (with new public keys being generated with each new transaction). These keys enable you to receive, store, and send Bitcoin to other users and allow you to check your Bitcoin account balance.
What To Look For In Your Bitcoin Wallet?
Certainly, the most significant feature to look for when choosing your Bitcoin wallet is its security features.
Unbeknownst to many users, Bitcoin is actually a fairly transparent banking system. All of the transactions are recorded through the Bitcoin blockchain. As a result, all of the information regarding transfers, deposits, and so forth is stored on Bitcoin's blockchain.
It's critically important to use a wallet with a formidable security system. Not only is your information public, thereby free to trace back to you (challenging to trace back, but still doable), you also need to protect your wallet from thieves hacking into your passcodes and gaining entry to the wallet itself.
Most of these digital wallets are password-protected, and many offer other security features such as encryption, two-factor authentication, and other protections.
Another element to look for is to make sure your wallet matches whatever currency you use. There are different wallets for every digital currency, and some wallets aren't compatible with others.
You also want to make sure your wallet doesn't charge any hidden fees or extraneous charges when you want to deposit Bitcoin. While most wallets have a small fee, check around to see you're getting the right deal with your wallet before you make your selection. Even though fees may not seem like much, once you begin transferring your Bitcoins enough, these fees can add up easily and end up costing you a lot of money.
Transferring Bitcoins With Your Wallet
While for the most part, transferring Bitcoin is a simple process. However, the exact nature of transferring Bitcoins does vary from wallet to wallet.
Regardless of what wallet type you use, you will always need to know the recipient's address to send your Bitcoin. A recipient address will be a long, alphanumeric string of several randomly generated numbers and letters. You can copy and paste this address key, or sometimes you can use a QR code instead.
How long does it take to transfer bitcoins between wallets?
Typically, most transfers are completed within a matter of minutes. However, sometimes the transfer does get delayed, in which case it may take days for the transfer to go through.
A delay can happen for two main reasons; the first is a blockage within the actual blockchain, the other is too low of a transfer fee. Miners are the ones who approve transfers by solving complicated math problems.
The higher the transfer fee, the more easily your transfer will get picked up because the fee goes directly to the miner for solving and approving your transfer. Therefore, if you assign too low of a transfer fee, miners are less likely to pick up your transfer, which can result in delays.
Unfortunately, if a delay happens, the only solution is to be patient and wait for the transfer to go through, as it is impossible to edit the transfer fee once the process has begun. In rare cases, the blockchain will cancel the transaction, in which case all of the funds are immediately sent back to the sender.
Upon making the next transfer, you may want to try increasing the transfer fee in hopes of getting it picked up by a miner more quickly. It may go without saying, the higher the fee, the less time you have to wait. If you need to get your Bitcoin as soon as possible, simply pay a higher transaction fee for faster wait times. You can find out more about crypto mining in our articles.
Confirming Bitcoin Transfers
Once the transfer is complete, you should get a notification that the transfer went through. If you'd like to dive deeper, there is a way to view the transfer to ensure that it did indeed go through to the correct receiver address.
Because the Bitcoin blockchain is a public ledger, anyone can view a Bitcoin transaction using a Bitcoin explorer website. Therefore, the most efficient way to confirm your transfer is to search for the receiver's Bitcoin address.
Here are the steps to confirm your transfer:
- Open any blockchain explorer site (like blockchain.com/explorer, BlockCypher, or Block Explorer)
- Then, search for your "receiving" Bitcoin address (the address the funds are being sent to).
- Select the transaction that matches the Bitcoin amount you're expecting. You can also check the date the transaction was made.
- Once you're looking at the transaction itself, you can view the confirmations received so far. You can also see the full details of that Bitcoin payment.
How To Add Money To A Bitcoin Wallet
When people try to add money to their Bitcoin wallet, they really mean that they're trying to add digital currency to their wallet. To do this, you must purchase Bitcoin or another digital currency.
You can achieve this by either finding a certified vendor or you can do the process using an ATM.
If you decide to use a vendor, you must take extra precautions to ensure that the vendor is legitimate and certified. You also must make sure to double-check to make sure your address is correct.
Many vendors online boast you can trade cash for Bitcoin, but this is a very risky move as it's easy enough to pose as a vendor. Many people fall into this trap, send their money to the vendor, and then the vendor disappears into thin air. Once someone steals your money online, it's nearly impossible to trace them to get the money back.
Talk to other people in the trading community to find out what vendors they use. You can also use groups such as the Deer Group Tech Recovery to locate a verified vendor.
You can also use a Bitcoin ATM, which is a kiosk that is connected to the internet and allows users to purchase Bitcoin and add it to their digital wallets in exchange for cash.
Like with any significant deposit, make sure to use a Bitcoin ATM in a safe and secure neighborhood (preferably during the day) to eliminate the risk of getting robbed while you deposit your cash.
Another thing to note is that some Bitcoin ATMs have limited transactions, so if you plan to make a large deposit, you may have better luck breaking the transaction up into smaller amounts over a few days.
How To Secure Your Bitcoin Wallet
Because your wallet is the place where you store not only all of your information but also hold all of your digital currency, it's imperative to take the necessary precautions to secure your Bitcoin wallet.
Below are some tips to help you keep your information and Bitcoins safe from hackers and thieves.
Wallet Addresses and Anonymity
Many users have a preconceived notion that the Bitcoin network is an anonymous trading platform. Not only is this assumption false, but Bitcoin has one of the most transparent payment networks around.
In fact, if you know where and how to look, anyone can see the balance and transaction ever made in Bitcoin history. And, since users usually have to confirm their identity to receive services or goods, Bitcoin addresses and wallets are never fully anonymous.
When choosing your digital wallet, make sure that you prioritize security features to make your wallet as secure as possible. Also, a Bitcoin address should only be used once, and you must be careful never to disclose your addresses while trading, while on a trading platform, or to anyone you meet on the internet.
Public Keys, Private Keys, And Privacy
Each bitcoin wallet comes armed with two types of keys; a public key and a private key. These keys are a matching set, and you need both keys to use your bitcoin wallet and trade in crypto.
You give out a public key to the receiver, and you keep the private key for yourself. As the name suggests, you want to keep this private key a secret as with both of these keys; users can send and receive money through your bitcoin wallet. Public keys are derived directly from a corresponding private key.
Many wallets will create new public keys each time you send money to maintain the users' privacy. Treating keys as single-use tokens dramatically improves your privacy and security.
How To Find Out Who Owns A Bitcoin Wallet
Again, Bitcoin records every transaction through its public blockchain. As a result, most information is readily available, including:
- transaction amount
- date of transaction
- Sender's address
- Receiver's address
From this information, it is possible to trace the owner of a Bitcoin wallet, although it is a little complicated and requires great technical skill. One of the more common ways is to use public information such as a receiver's address and then track down more identifiable information through their positing history with the same wallet address.
You can also trace the owner of a Bitcoin wallet through companies like Elliptic and Chainalysis; however, these companies are reserved for clients and are not accessible to the general public.
How To Cash Out From Your Bitcoin Wallet
Arguably, this is the most critical step. Once you have a balance in your wallet, most users are more than eager to transfer their digital currency into cash.
It's important to note that each digital wallet varies slightly in the withdrawal procedure, so the steps to cash out depend on which wallet you choose. However, most of them follow these rough step-by-step guidelines.
1). First, find the send/receive button, and go to that page.
2). After you're on the send/receive page, you must connect and unlock your ledger.
3). Next, check the Bitcoin address that is showing on your device. It should be your Bitcoin wallet address and nobody else's.
4). Then, use the app to copy the address or scan the QR code that shows in the ledger.
The most important thing is to ensure that the wallet address you send your Bitcoin to is correct. If you send your bitcoin to a different address by accident, there is no way of getting your money back.
You can also use a Bitcoin ATM, although again, carrying loads of cash from an ATM to your car can be risky, especially if you withdraw the money in an unsavory neighborhood. Always be on the lookout for thieves when making big withdrawals.
Fees and Bitcoin Taxes
There are some aspects to consider before cashing out. Most wallets have fees associated with cashing out, so you want to be strategic with how much you decide to cash out when. For example, Coinbase charges 4% per transaction. After a while, those fees can add up.
It's also important to note that you will have to pay taxes on any profit you make off Bitcoin. This means that anytime you cash out, you will need to report it to the IRS. So, if you plan on using Bitcoin to make a lot of purchases, it may make more sense to keep some of your Bitcoin in your wallet to avoid hefty tax fees.
Make sure you understand the number of fees and taxes you will have to pay before making continual transfers to optimize your savings. Some new users feel uncomfortable leaving too much Bitcoin in their wallets for fear of theft, so if you need to cash out more often in the beginning, that's fine.
However, the more comfortable you become with cashing out and the process involved, the more you might want to wait to cash out until you have a more considerable sum, so you don't have to continue paying exorbitant fees.
How To Choose The Best Bitcoin Wallet?
There are many types of digital wallets to choose from. Apart from the subtypes of wallets, there are also hot and cold wallets. However, we'll get to that in a bit. For now, here are the main types of digital wallets you can choose from:
- mobile wallets
- hardware wallets
- desktop wallets
- web wallets
As you might imagine, a mobile wallet is a wallet that you use on your cellphone that controls your Bitcoin wallet, transactions, and so forth.
Mobile wallets excel at convenience. They work the same way as any other mobile payment system such as Apple Pay and allow you to pay for items in retailers who accept Bitcoin and cryptocurrency.
So, if you're someone who plans on spending your Bitcoin rather than saving or transferring it to cash, a mobile wallet may be a great option. As Bitcoin rises in popularity, more and more retailers are beginning to accept Bitcoin, which means mobile wallets will come in handy.
Many mobile wallets also have extra security features like QR codes to make on-the-go transactions easy and safe.
If you do plan to use a mobile wallet, you must use extreme caution. Since all of your wallet information is stored on your phone, you must make sure not to lose your phone as it is easy enough to hack in and steal your information. Additionally, mobile phones pose a risk since the chances of getting a virus or malware is increased because your phone connects to the internet.
All in all, if you use proper protection (like being wary when using public wifi, not losing your phone, backing up your savings on a more permanent desktop wallet), mobile wallets provide users with fast, convenient transaction options. As a result, mobile wallets are one of the most preferred types of Bitcoin wallets.
Some popular mobile wallet options include:
- Bitcoin Wallet
- Atomic Wallet
If you're looking for the most protection, a hardware wallet is the way to go. Hardware wallets are the cream of the crop when it comes to safety and security because they store keys and information on a separate device (similar to a USB drive) that is not connected to the internet.
Hardware wallets also enable users to make online transactions, so you have the same convenience as an online wallet but with the added security of offline storage.
But the protection comes at a price. While there are certainly other more affordable wallets, hardware wallets can cost up to 150 dollars per device. However, if you're putting a lot of currency in your wallet, the upfront cost might be a wise financial decision if it means protecting your assets.
Some popular types of hardware wallets include:
- Ledger Nano X (best for storing large amounts of cryptocurrency)
- Trezor One
- SafePal S1
As the name suggests, a desktop wallet is an application that runs on your computer. Through this app, you store all of your Bitcoin on your desktop computer.
There are many advantages to having a desktop wallet. The most significant advantage is you have complete control over your funds, and no one can freeze or lose your funds. However, you must protect your funds by backing up your wallet. Since your computer is connected to the internet, you are vulnerable to getting a virus or malware, which can easily compromise your digital wallet and funds.
Some popular desktop wallets are:
- Atomic Wallet
- Bitcoin Core
Web wallets are a nice in-between desktop and mobile apps. These online Bitcoin wallets can be used either on the desktop or on the go, so you have the most convenience and flexibility with these btc wallets.
Web wallets are also excellent protection in case your hardware fails or if you lose your cell phone.
However, web wallets don't allow users as much control as you would get by using a traditional desktop or mobile wallet. Also, since it is still connected to the internet, you need to make sure you choose a secure enough password to protect yourself from getting hacked.
Robinhood provides an excellent web wallet. Coinbase is another great resource to consider when you get a Bitcoin wallet online.
Banks are a bit of a longshot, which is why they're the last option on our list. You may have noticed while scouring different banks that many are not cryptocurrency-friendly. Many say that this is because they are threatened by money laundering, although this seems to be more of a convenience to say no to bitcoin as the rise of Bitcoin directly competes with banks. So, it's possible that banks are just trying to suppress Bitcoin to stay in business.
Regardless, some crypto friendly banks have begun to accept Bitcoin (and have even begun creating cryptocurrency on their own). This can be helpful as they can monitor your account for any suspicious activity.
However, it doesn't seem as if there's a need to store your crypto with banks as Bitcoin already holds your coins securely through its blockchain. Furthermore, when you store your Bitcoin with banks, you are subject to them freezing your account, withdrawal limits, and so forth.
Wallets At A Glance
Hot Versus Cold
The two main storage types of cryptocurrency wallets are hot and cold. Hot wallets are connected to the internet, making them less secure but easier to use for daily transactions.
The most secure type of wallet is a cold wallet because they are stored offline. Hardware wallets are an example of a cold wallet. Because they are stored offline, they are not susceptible to malware or viruses. For these reasons, cold wallets are great for storing Bitcoin rather than spending it.
Bitcoin now gives users the option to create a wallet with more than one person, called a multi-signature wallet. These shared wallets are accessible by two or more persons and require at least one of these 'cosigners' to authorize the spending of BCH from the shared wallet.
By creating a shared wallet, users experience enhanced security as a thief would need authorization from not one but two cosigners before spending from your account. Setting up a multi-user wallet may also come in handy if you are part of a large organization and would like to have a majority vote of consensus before authorizing significant payments.
To set up a shared wallet, follow these steps:
1) First, download the Bitcoin.com wallet app (you can choose between iOS, Android, Windows, Linux, or Mac)
2) Then, tap the plus button in the Bitcoin Cash Wallets Menu and create a new wallet.
3) Once you are on the "Add Wallet" menu, there should be an option that says "Create a shared wallet."
4) Set the wallet name to your name
5) Add the total number of cosigners (Note that the total number of cosigners is the number of people or devices that can access the wallet.
6) Share the invite code with the other cosigners.
Note that the term "Required number of signers" refers to how many people or devices must authorize a transaction before the transaction can be sent.
Which Bitcoin Wallet Is Best?
Luckily for us Bitcoin enthusiasts, there is no shortage of companies and apps providing Bitcoin wallets. The first step is to understand what you'll be using your Bitcoin wallet for the most; do you plan to transfer Bitcoin to cash? If so, you may want to find a wallet that has low transfer fees. If you plan to spend more, you may want to lean more towards a Bitcoin wallet.
Once you decide what you're specific needs are, you can narrow down the search from there. While there are many features to choose from, make sure you emphasize wallets with formidable security features.
If you're storing a sizable sum in your wallet, it's best to opt for a cold wallet to make sure your wallet has the most protection possible. If you're starting and have only smaller amounts, you may want to go for a hot as they're easier to use on the go and often cost less than cold wallets. It also never hurts to have both hot and cold wallets to back up your information.
Lastly, make sure you choose a wallet compatible with your desktop and phone (i.e., if you use Apple, make sure your wallet is compatible with Apple).
Below are a few commonly asked questions with beginners looking to open up a Bitcoin wallet for the first time.
Why Does Owning A Bitcoin Wallet Matter?
A bitcoin wallet matters because you cannot trade in cryptocurrency without one. Simply put, a Bitcoin wallet allows you to purchase, store, transfer, and receive digital currency. Without one, you would have nowhere to store any digital currency.
Where Can I Get A Bitcoin Wallet?
You can download the software from the Apple store or Microsoft store. First, you must decide which Bitcoin wallet you want the most. Make sure to research all of your options thoroughly to figure out which kind of wallet you'd like and what company you want to work with. Then, download their app from either store to set up your Bitcoin wallet.
Can Bitcoin Owners Be Traced?
Since every transaction is on Bitcoin's public blockchain, Bitcoin wallet owners can indeed be traced. While this may be unlikely, a hacker can trace the identity back to you from your wallet address from your transaction history.
If you're an advanced Bitcoin investor with many assets in your digital wallet, you may want to take extra precautions to be as secure as possible.
With more and more investors opening up to the world of Bitcoin, now's the time than ever to dive into cryptocurrency investing. You'll need a btc wallet to make the best investments and jump into the world of Bitcoin.
A good rule of thumb is to get a mobile wallet and a hardware wallet so that you get the convenience but have a place to store large amounts of Bitcoin without running the risk of compromising your wallet from theft, malware, or viruses. Whatever wallet you choose, make sure to research it thoroughly beforehand to ensure that the company is legitimate.