Bitcoin's (BTC) recent price rally has attracted a large number of investors and traders who are now seriously looking at the BTC token as an investment driver. This means that it has become imperative for such individuals to identify and use the best Bitcoin wallets to ensure their coins are stored in a safe and secure manner.
Users must carry out a comprehensive and thorough review of some of the most popular options before finalising a wallet. A number of factors including user-friendliness, convenience, price and security should be evaluated to determine the best Bitcoin wallets in 2021.
Our List of the Top Bitcoin Wallets
Based on online reviews and user testimonials, the following Bitcoin wallets deliver the finest balance of security, performance, connectivity and user-friendliness.
What Is a Bitcoin Wallet?
A Bitcoin wallet, or a cryptocurrency wallet in general, is a software program or a hardware device that is used to store your Bitcoins in a secure manner. Majority of wallets have the ability to interact with the blockchain network and they can generate the relevant information that is necessary to send and receive digital funds through blockchain transactions.
Your Bitcoin tokens are as secure as your Bitcoin wallet. Some traders or crypto enthusiasts hold long-term positions so they need to store their BTC tokens for a long time, for months or even years, before they sell. Their primary focus is on robust and unwavering security and they don’t give as much importance to convenience or accessibility features.
On the other hand, there are traders and investors who execute short-term trades which require immediate access to their BTC coins. While security is still paramount, they need to find a wallet that offers the right combination of security and accessibility. Different Bitcoin wallets offer different types of features so you need to make the right choice ensuring your selected wallet delivers exactly what you are looking for.
How Do Bitcoin Wallets Work?
Bitcoin wallets allow you to send and receive BTC tokens by complying with the Bitcoin protocol. A Bitcoin wallet features a unique digital ID present on the Bitcoin blockchain to keep a record of how much bitcoins you have. Every Bitcoin wallet features a private key which is needed to transfer your tokens out of the wallet to make a purchase or a trade. The addresses of Bitcoin wallets are public, but their private keys are confidential and are secured by the wallet owner to ensure the best security. Bitcoin wallets are accessed through the internet, desktop, laptop, hardware devices and mobile apps.
You have to keep in mind that BTC tokens are not stored on the wallet itself. Every BTC token actually exists on the blockchain and instead of owning a specific Bitcoin or part of it, you actually own the combination of its public and private keys that enables you to access the said Bitcoin. If you are looking to spend the Bitcoins present in your wallet, you have to have the public wallet address of the person you want to send your tokens to.
Types of Cryptocurrency Wallets
Bitcoin wallets come in different types and can be categorised based on multiple factors. In order to identify the right wallet for your needs, you have to develop an understanding of a variety of wallets so you are in a better position to make the right choice.
If a Bitcoin wallet is connected to the internet, it is defined as a hot wallet. The term 'hot' signifies the fact that it is always ready to be accessed because of its online connectivity. Hot wallets are easier to use as they deliver improved accessibility. They are less secure as compared to the cold wallets but are more user-friendly.
Since they have online connectivity, hot wallets are more prone to cyberattack and security breaches. Hot wallets are a better choice for those traders and investors who engage in transactions on a daily basis and don't need to hold their Bitcoins for a long period. They are also much easier to set up and ensure that your crypto funds are readily available.
These are those Bitcoin wallets that aren't directly connected to the internet to ensure robust and foolproof security. It becomes difficult for you to access your BTC tokens stored on cold wallets since they don't have online connectivity but that also makes it next to impossible for cybercriminals and hackers to gain unauthorised access to your coins. Since there is no internet connectivity, they cannot capitalise on any security exploit.
Cold wallets are better suited for those traders and investors who want to store their Bitcoins for months or even years. These investors are often called 'HODLers' as they are looking to hold their BTC coins for a long period to ensure major gains. They don't have the urgent need to access their coins and they just want their cryptocurrency funds to be secure.
Hot vs Cold Wallets
- Cold wallets provide better security as they aren’t connected to the internet.
- Hot wallets provide better accessibility due to their online connectivity.
- Cold wallets are ideal for long-term investors who want enhanced security.
- Hot wallets are ideal for day traders and short term investors who want quick access.
- Cold wallets are less prone to cyberattacks but are more challenging to set up.
- Hot wallets are more prone to cyberattacks but can be set up easily.
These are cold wallets that come in the form of a physical device that often looks like a flash drive. These wallets handle the public keys and addresses individually and usually feature buttons and a screen for manoeuvring. There is no battery inside and they can be connected to a computer. You can access the device using their native desktop app. Hardware wallets often are the most expensive but deliver the best security.
Mobile & Desktop Wallets - Software Wallets
These are hot wallets that come in the form of software programs and mobile apps. Over the course of the last few years, software wallets have become increasingly advanced offering high-end security combined with enhanced accessibility and trading features for crypto brokers and investors. Software wallets can be further categorised into:
- Desktop Wallets - These are software packages that you can install on your desktop PC or laptop just like any other computer program. They can also be turned into cold wallets as you can disconnect your computer from the internet once you have transferred the Bitcoins. They are user-friendly, provide anonymity and privacy, and there's no involvement of a third party. You just need to ensure that you are backing up your data so no information is lost.
- Mobile Wallets - These are also software wallets but they come in the form of mobile apps. They are not too secure but offer immediate and on-the-go accessibility to day traders and crypto investors. They often rely on QR codes for transactions. It is important that you choose a mobile wallet that is encrypted so your funds remain secure.
This is another type of physical wallet that secures your BTC tokens by printing the keys in a QR coded form. They keep your private keys offline but are the least user-friendly of all types of wallet. Paper wallets or purses used to be highly popular prior to the emergence of hardware wallets but their popularity has reduced since then.
Key Things to Consider When Choosing the Best Bitcoin Wallet
Before you make the final choice about your preferred Bitcoin wallet, you have to ensure that you have evaluated a multitude of key factors and your choice will fit your requirements. Some of these top features are:
- Security - The primary objective of a Bitcoin wallet is to offer security. Ensure that the wallet you are selecting offers the right type and extent of security for your purpose. For instance, if you are trading daily, then a software wallet is secure enough but if you want to 'hodl', then a hardware wallet would be a better choice.
- Compatibility - Although almost every wallet is compatible with Bitcoin, you have to ensure that the wallet you are getting supports the coins you are going to store. Some wallets don't support a few types of altcoins so you might want to keep that in mind.
- Accessibility - If you are a day trader or short-term broker who wants to access the BTC tokens almost on a daily basis then you need to have a wallet that allows you to access your coins in a user-friendly yet secure manner. Find a wallet that offers the best balance of accessibility and security.
- User-Friendliness - Those who are not very familiar with Bitcoin wallets might want to get a wallet that is much easier to use and has a user-friendly interface.
Pros and Cons of Using Bitcoin Wallets
If you are looking to store your Bitcoin in a safe and secure manner, then a Bitcoin wallet is the ideal option. The real question is which one? You need to evaluate a multitude of factors like security, ease of use and accessibility to make a final decision.
Frequently Asked Questions
A hardware wallet. It is not always connected to the internet which makes it less prone to cyberattacks.
Software or hot wallets. They are connected to the internet and provide easy accessibility to the users.
Some types of wallets such as paper purses and hardware wallets will require you to have technical cryptocurrency knowledge. Software wallets, especially mobile apps are much easier to use.
Paper purse or a hardware wallet. They provide the highest level of security.
BTC wallets use modern security features like end-to-end encryption, passphrases and two-factor authentication to keep your BTC tokens secure.
Unfortunately, if you lose your private key, there is no way to regain it.
Yes. Many Bitcoin wallets today offer you the ability to trade directly.
No. All the Bitcoins are present on the blockchain. What you store are private keys that are used to access those particular Bitcoins.