What is a blockchain wallet and how do you choose the best one for you?
If you are getting started in cryptocurrencies then one of the first things that you need to know about are bitcoin wallets. It makes sense. If you want to carry another currency, you need somewhere to keep it. Bitcoin wallets give you somewhere to keep your digital cryptocurrency.
Bitcoin wallets use blockchain technology to keep your cryptocurrencies secure. They are run online or from apps and give you different features which help you keep your bitcoin secure. They are like a bank account for your bitcoin but without the bank.
There are two types of bitcoin wallet:
- Software Wallets – This kind of wallet is software that you install on your computer or mobile device. They give you complete control of your bitcoin but sometimes beginners can find them tricky to maintain.
- Web/Hosted Wallet – This kind of wallet is hosted online by a third party. These wallets look and feel more like apps/platforms and can be easier to use. As they are hosted by a third party you need to look into the security that they use to ensure that they have systems in place to protect your bitcoin.
Choosing a bitcoin wallet for you
Frederick Coleman from Blockonomics, a startup which helps you track multiple blockchain wallets, recommends that newcomers look at the popular bitcoin wallet Blockchain to get started. He comments that you need to look for ‘security, ease of use, and privacy’ when deciding which bitcoin wallet is for you.
As a more experienced user he uses Coinbase. He talks about his choice saying
‘It has better security in the form of a seed phrase, and is a desktop app rather than web based.’
Blockchain is a great place for beginners to start their bitcoin journey. They describe their wallet as ‘simple, cross-platform and global’. As with all bitcoin wallets they are not a bank and are keen to reassure users that they cannot view your balance or any of your transactions. As Frederick commented, security is key.
They are also keen to help new users of bitcoin and welcome them to their cryptocurrency journey. With a whole section of their website dedicated to FAQs on cryptocurrency, wallets and how to buy bitcoin, it really is a great place to start.
Coinbase is the most popular bitcoin wallet and supports buying and selling of bitcoin as well as the other cryptocurrencies ethereum and litecoin. Serving 8 millions users across 32 countries it offers a mobile wallet app, insurance protection, instant exchange and recurring buys.
Getting more from blockchain technology
As you become more experienced with bitcoin and blockchain technology, there are a range of bitcoin wallets that you can choose from.
Gili Gershonok uses Jaxx. Jaxx is a blockchain interface which supports many of the top cryptocurrency platforms. It doesn’t hold or have access to your funds at any time and there is no onboarding or verification required. Gili uses it for two reasons
‘ShapeShift onboard allows trade among different cryptocurrencies I hold and the passphrase recovery option means the idea of losing my phone is a little less scary.’
ShapeShift is a fast, private way to swap digital currencies that is supported by Jaxx.
As well as making Jaxx accessible on most smartphones and browsers, Jaxx make their code accessible for audit. Skilled developers and other bitcoin users are welcome to look at the code they’ve developed in order to make sure they feel secure when using their platform.
For Gili though, security is key. She has recently ordered a hardware Ledger Nano wallet. She explains ‘since the value of BTC and ETH been growing rapidly, I feel a hardware wallet is safer but it could be just an old school illusion.’
It is clear that as your bitcoin experience grows there are so many options available. Again, security is a key issue here. Hardware wallets like the Ledger Nano are compatible with multiple cryptocurrencies and connect via USB to any computer. It also uses a display to double-check and confirm each transaction so that you know your bitcoin is secure.
Developing the blockchain wallet of the future
Beyond the basic features for a bitcoin wallet there are developers who are taking this even further. Using the blockchain technology that bitcoin is based on, there are more software and web-based wallets emerging with new features.
‘It’s the only one built right into your web browser. Such as Chrome, Firefox, Safari, etc, in which you can actually mine the coins there. Having the blockchain built into the browser has many other advantages too. Such as a “one click install”, as compared with the extreme, only for geeks, installation process of all other cryptocurrencies.’
As well as offering a wallet app which doesn’t use any intermediaries, Nimiq is building a third generation blockchain protocol which will be installation free, sync in seconds and provide instant transactions. This is another exploration of the power of blockchain. Whilst Nimiq is using this to provide another wallet for bitcoin users this could also be the building blocks of the secure platforms of the future.
Bitcoin, cryptocurrencies and blockchain technology can seem like a lot of jargon. It often seems hard to find a simple way to get started with these new currencies. But users of bitcoin know that the value of the currency they are using and exchanging will lie in more and more people adopting and using the currency. This means there are easy ways to get started and continue to develop your bitcoin fortune along the way.