[GUIDE] Bitcoin Wallets - What's the best for you?

[Decoded]

Hey guys, it's Decoded!

One of the most essential things when it comes to a cryptocurency like bitcoin is to have somewhere safe to store it. It's almost impossible to brute force into your bitcoin wallet, however it's worlds easier to drop malware into a computer that takes your passwords and wallet files. So how best to store your bitcoin?


-Coindesk, Bitcoin Security

I'll categorise wallets into six parts::

- Hardware Wallets
 - Multisig Wallets
 - Normal Wallets
 - Paper Wallets
 - Web Wallets
 - Dedicated Cold Wallets

Hardware Wallets
A hardware wallet is a bitcoin wallet that uses physical storage. At the moment, this is definitely one of the best storage options available. The current norm of these is the concept of your private key being stored on the physical wallet itself, either in a credit-card-like chip, or an encyrpted storage form. They are coded specifically so that malware cannot access the private keys. Therefore the only way to succesfully retrieve your private key is to have a virus intercept the recovery key given to you when initializing the wallet.


-Trezor hardware wallet

This wallet is best for a single user.

You can find a thread listing these here: https://forum.bitcoin.com/alternative-clients/overview-bitcoin-hardware-wallets-secure-your-coins-t200.html

My personal recommendation is simply based on budget.

<$2o: Ledger HW.1 (My personal choice and what I currently use. One downside is that it cannot sign messages. Review here: http://www.cryptodot.com/home/hardware-wallet-review-ledger-hw1)
<$40: Ledger Nano (Exact same as the HW.1 but with different build quality and a leather card slip. Cannot sign messages.)
<$70: Ledger Nano S (A cheaper alternative to the more expensive trezor, however the trezor is more flexible. Not sure if able to sign messages)
~$100: Trezor Wallet or KeepKey (The latter is more fashionable, however the former is more trusted and more rigid/sturdy).
>$100: Case Wallet (This wallet is more gauged toward the everyday spender. You can send only through scanning QR codes, but it is a standalone device and you can send it from almost anywhere without an accompanying computer.)

Pros:
 - Great security
 - Not the broadest range to choose from
 - Great portability
 - Good value for security

Cons:
 - Not free
 - Vulnerability when first generating recovery seed
 - Owner needs to remember/keep recovery seed

Multisig Wallets

Multisig wallets are wallets that take advantage of multiple signature technology. A wallet has an odd number (usually 3) of private keys, which are held by more than one party. There are many uses of this -

If a hacker gains control of only one private key, they will need more to have control over the wallet.
If there is a group transaction, an equal amount of power can be distributed between parties
In a p2p trade, the odd key can be used by an escrow/middleman

-BitGo visual explanation of the multisignature process

This wallet is best for a single user or small group.

A good list of these wallets can be found here: http://bravenewcoin.com/news/the-best-multisignature-wallets-for-2016/

My personal preference is BitGo, as they were the first to release their wallet with multisig and is supposedly have been developing their wallet the longest. They also have insurance, a huge plus.
NOTE: The recent bitfinex hack has been linked with BitGo, due to both BitGo and Bitfinex having compromised keys. They supposedly have fixed this issue.

Pros:
 - Some wallets provide insurance
 - High security, low effect on performance and user experience

Cons:
 - Wallet provider and 3rd party can team up and steal your coins
- If the provider is compromised, effectively everyone using it has the same security as a normal wallet

Normal Wallets



A normal wallet is a wallet that is akin to Bitcoin Core, without any add-on security measures. These wallets can be split into two categories, SPV and Full wallets. These can be password-encrypted, however a simple keylogger can get past these security measures.

This wallet is best for a single user

Full wallets download the whole blockchain, the public ledger of all bitcoin transactions in history, currently totaling to over 100 gigabytes. This is a hassle for some people as they may not have enough storage, or cannot bear to sync their wallet for almost a week for the first time, downloading the whole blockchain from scratch.

SPV wallets only download the block headers of each block, which in comparison to the whole blockchain, is tiny.  The wallet will connect to external nodes to retrieve their copy of the blockchain instead, only retrieving the information they need and effectively removing and sync times. The problem with these however is that your information is at the hands of the node your wallet connects to. A malicious node could easily lie to your wallet about your balances and transactions. In actuality they will stay the same, but could cause you a heart attack.

Pros:
 - Traditional wallet, has all core features
 - Ability to host full node
 - Normal wallets provide powerful in built tools and a console that most other wallets don't
- SPV wallets are lightweight

Cons:
 - No security besides encryption that is password-encrypted
 - No 2FA
 - Full wallets take up a LOT of space
 - No more CPU mining capability

Paper Wallets

This wallet is best for long term storage, for use of a single user.

These wallets, usually used for long term storage, are made of - yes, you guessed it - paper. A paper wallet is a private key and a bitcoin address printed on a paper, usually with accompanying QR codes to make it easier to send and withdraw from. The use of these is that if generated properly, the private key will never touch the internet and also any malware. You will want to generate one offline, and print it offline. However a good virus may still operate while your computer is offline, and could still take the private key and send it to the hacker once you bring the computer offline. That's if you do bring it back online.

To load up the wallet, you deposit into the public key. To send from the wallet, you will need to open a bitcoin wallet application on your computer and input the private key.

A good thing about a paper wallet is it's lifespan. Good ink and paper will take years to start fading, especially if in a place like a bank vault, where it is temperature controlled. If you store your private key in a USB, the memory chip may some day just crash.

Pros:
 - Long lifespan
 - Cheap to produce
 - The "poor man's cold wallet"

Cons:
 - Not as portable as a hardware wallet, since it can be destroyed, ripped or damaged easily
 - Can get lost easily

Web Wallets

These wallets are hosted on the internet. These are usually the some of least secure wallets, after normal wallets. This is because in most cases,  when using a web wallet, you are not actually in control of the funds. The website is. They hold your bitcoin and when you send bitcoin, they send it for you. There is only one exception to this list. Blockchain.info. They hold your bitcoin private key for you, but as an encrypted payload. They have no access to it, however they are in control of it. As if you have the key, but they have the chest. Only you can access it by putting in your password, where your browser decrypts the payload live. Blockchaininfo also supports two-factor authentication, where they ask you for a phone, email, sms or google authenticator code before sending you the payload. Another level of security.


-Image of my own wallet - Transactions removed for privacy

This wallet is best for a single user.

The problem with this is of course if blockchain,info goes down. Down goes your information, and if you have not saved a backup of your private key, you're doomed. But if you were to save a backup of a private key, then you would need somewhere safe to store it like a dedicated USB. USBs these days only cost a tiny bit less than a Ledger HW.1, so why not get that?

Pros:
 - Convenience
- Accessible from anywhere online

Cons:
 - Very low security

Dedicated Cold Storage

This form of storage, as opposed to the common term "hot wallet", (a wallet constantly connected to the internet) is very much the opposite. It is a wallet that has never touched the internet. A dedicated cold storage solution is a dedicated device that has never touched the internet. It is a costly but impossible to hack into when done properly.


-blog.adafruit.com - You can use a relativelyinexpensive device like a Raspberry Pi to host your cold wallet

To use this solution, you need your dedicated unit, which will generate the offline transaction hash, signed with the private key. You copy this transaction hash to your computer which is connected to the internet, and broadcast it. Therefore the computer that holds the private key has not touched the internet in this procedure.

This wallet is best for use of large companies. It's overkill for a single user, unless they have a whole lot of funds stored.

To send the bitcoin, all you need is for the offline wallet to generate a receiving address, and send your bitcoin to it.

Pros:
 - Very high security
 - Good for commercial use

Cons:
 - Has to be manually overseen
 - Very hard to automate
 - Overkill
 - Costs alot

Personal Notes

Honestly, I wouldn't choose anything but a hardware wallet. They are the most secure, and relatively cheap when compared to a cold storage solution. If you really don't want to spend anything however, use a multisig wallet like BitGo. If you're a company that handles a large amount of bitcoin, like an exchange, only withdraw what you need every day from cold storage, so if you get hacked, only that small amount will be taken, not your total amount in storage.

I personally own a HW.1 and have never been happier. May even be upgrading to a trezor soon.

This post was taken from my forum.bitcoin.com thread, and I only just realised that I should post it here too ^_^

Thanks for taking the time to read this! If you liked this post or found it useful, please post! Discuss what could be added, and what could be changed. Cheers!

[coin@coin]

Thanks for the guide there are a lot of new joiners that ask questions about wallets.

They'll find this guide useful, appreciated.

[Aventhe]

Nice Guide! This will certainly help a lot of new users to help decide about their wallet choices.

Did you make this all by yourself?

[OgNasty]

Nice guide. Lots of great information.

I did notice you say paper wallets are, “Not as portable as a hardware wallet” which I don’t necessarily agree with. I think it should be replaced with the con, “More easily destroyed than a hardware wallet” which I think is more accurate.

[clarkt]

I'm pretty new. Going to get one of this

[moopser]

Thanks for re-post. Recently on bitcointalk too much questions in this regard can be seen.

For what this guide is missing - wallets for mobile devices. This type of wallets, in despite that they can be considered as less secured, is quite valuable option thou.

[OmegaStarScream]

Case wallet is sold out for long time, I believe they didn't restock it since months now and the price is definitely far from 100$. I remember it being 200-250$. As for signing messages both Trezor and Ledger Nano S can do that (this feature doesn't work for SegWit addresses yet)

[DragonQuan]

Hi!

With the impending hard fork with Bitcoin Gold in October and 2x in November, what type of wallet should I put my bitcoin in to ensure I will get both currencies (the original and the new)?

I currently leave my BTC on coinbase (which apparently is a horrible idea) and from what I have read, people who had BTC during the Bitcoin cash hardfork did not get their bitcoin cash. I want to ensure I get what I technically own.

Thank you!

[Decoded]

Hi!

With the impending hard fork with Bitcoin Gold in October and 2x in November, what type of wallet should I put my bitcoin in to ensure I will get both currencies (the original and the new)?

I currently leave my BTC on coinbase (which apparently is a horrible idea) and from what I have read, people who had BTC during the Bitcoin cash hardfork did not get their bitcoin cash. I want to ensure I get what I technically own.

Thank you!

Don't put your Bitcoin on Coinbase, that's for sure. They threatened to not credit users with their BCC (but eventually did). Most good wallet developers will support their community by supporting all forks. Use a wallet like Electrum for the time being, or even better, if you have a Ledger or Trezor wallet.

Thanks for re-post. Recently on bitcointalk too much questions in this regard can be seen.

For what this guide is missing - wallets for mobile devices. This type of wallets, in despite that they can be considered as less secured, is quite valuable option thou.

On my to do list. Stay tuned.

I'm pretty new. Going to get one of this

Yay!

Nice guide. Lots of great information.

I did notice you say paper wallets are, “Not as portable as a hardware wallet” which I don’t necessarily agree with. I think it should be replaced with the con, “More easily destroyed than a hardware wallet” which I think is more accurate.

ftfy!

[coinspam]

Hi!

With the impending hard fork with Bitcoin Gold in October and 2x in November, what type of wallet should I put my bitcoin in to ensure I will get both currencies (the original and the new)?

I currently leave my BTC on coinbase (which apparently is a horrible idea) and from what I have read, people who had BTC during the Bitcoin cash hardfork did not get their bitcoin cash. I want to ensure I get what I technically own.

Thank you!

Don't put your Bitcoin on Coinbase, that's for sure. They threatened to not credit users with their BCC (but eventually did). Most good wallet developers will support their community by supporting all forks. Use a wallet like Electrum for the time being, or even better, if you have a Ledger or Trezor wallet.

Has Trezor and Ledged confirmed they will support the new forked coins?

[Alosa]

I think blockchain is the best <3

[DragonQuan]

Hi!

With the impending hard fork with Bitcoin Gold in October and 2x in November, what type of wallet should I put my bitcoin in to ensure I will get both currencies (the original and the new)?

I currently leave my BTC on coinbase (which apparently is a horrible idea) and from what I have read, people who had BTC during the Bitcoin cash hardfork did not get their bitcoin cash. I want to ensure I get what I technically own.

Thank you!

Don't put your Bitcoin on Coinbase, that's for sure. They threatened to not credit users with their BCC (but eventually did). Most good wallet developers will support their community by supporting all forks. Use a wallet like Electrum for the time being, or even better, if you have a Ledger or Trezor wallet.

Thank you so much. I'm currently experimenting with bitcoin so probably won't get a trezor or ledger. Is electrum a good option for beginners?

[OmegaStarScream]

Thank you so much. I'm currently experimenting with bitcoin so probably won't get a trezor or ledger. Is electrum a good option for beginners?

It's the best option as long as your computer is clean from any malware and you're not holding large amounts of bitcoins, whether you are a beginner or not.

[Decoded]

Thank you so much. I'm currently experimenting with bitcoin so probably won't get a trezor or ledger. Is electrum a good option for beginners?

It's the best option as long as your computer is clean from any malware and you're not holding large amounts of bitcoins, whether you are a beginner or not.

Yep. Electrum's wallet is basically Bitcoin Core, without the syncing. It has almost all of the original wallet's features, and more. The problem is that the security is fairly simple. All your private keys and transaction history is dumped into a single file, making it easy to access. You can password protect it, but that's easy prey for a keylogger, or some RAM skimming malware when your wallet is open.

If you're going to be using advanced features like multi-send or just want more control and want to learn about how these wallets work, use Electrum. But some multisig wallets have advanced security features (usually less functionality, though) and even insurance.

[Sewarlock]

Thank you so much. I'm currently experimenting with bitcoin so probably won't get a trezor or ledger. Is electrum a good option for beginners?

It's the best option as long as your computer is clean from any malware and you're not holding large amounts of bitcoins, whether you are a beginner or not.

I'd recommend to have a hardware wallet at all cases.. you can use electrum as a hot wallet (only small amounts which you transact) and keep the biggest portion of your crypto's in a hard wallet.. that's the standard pretty much nowadays and the most secure option

[hendra147]

thats a great guide. for me paper wallet is a good idea, im using it to store my bitcoin in offline mode, but we have other problem, where we can save our paperwallet in safe place, sometimes i am scarry about wildfire, storm or other disaster.

[topuli]

For the section cold wallet:

a combination of notebook, lifesystem (linux,windows) and a usbstick with secure firmware is also a good combination for a cold wallet.
For a windows live-system electrum standalone works quite well.
You can put the seed in an truecrypt encrypted keepass file on the usbstick.

Recommended USB-Sticks:

Kanguru Flash Trust
iStorage datAshur Pro

[redhorse]

Very nice guide. Thanks for the effort, I'm sure a lot of people will appreciate it and find this very overview very useful.

I think it would be worth to mention another disadvantage of a Paper Wallet compared to the hardware wallet: If you want to spend or transfer your coins from the Paper wallet, you would have to import your private key into a Desktop Wallet. This is a security concern because you would expose the private key to the PC running the wallet and this PC might be compromised with virus/trojan/malware . With the hardware wallet the private key never leaves the device.

[BobBoulder]

You've really made an effort to explain in a way that can be understood. I am very grateful that there are people who want to share knowledge with those who are beginners like me.

[pooya87]

Dedicated Cold Storage

just wanted to say that my definition of this is a bit different. which obviously makes the usage, and pros and cons of it different too. so i'm just going to leave my thoughts here and this is the cold storage that i have been using for years.

what you need:
- a USB disk (from 2 GB to 16 GB depending on how you want to approach this). This is the only cost ($10?)
- your favorite wallet. it can be anything that allows you to import/export transactions and sign/broadcast them. from core and armory to Electrum although some are more user friendly.
- your favorite linux distro. you can use the most famous one like Ubuntu if you are not familiar with linux

what you do:
- if it is a small USB then you use a smaller linux distro or use it live (Live Ubuntu can be installed on 2 GB easily). but a bigger USB disk and a faster one (eg USB 3.1) is much better because of speed and the fact that you can do a full install and have an easier time of encrypting an doing other things than you can do on the live one.
- after this you enhance the installation by encrypting your home folder, installing the wallet, encrypting the wallet, set login password, disconnect network permanently, disable guest users, .... (most of these are optional BTW).
- make sure to make a backup, such as printing your seed/private keys on a paper

the rest is just transferring the raw tx between cold and hot wallets for signing and broadcasting respectively.

pros:
costs nothing!
every code you use (such as the wallet or the linux itself) are open source
you have full control
the setup is very flexible, you can add any option like QR reader so that you don't even have to transfer anything physically
high security

cons:
it is a little complicated and you need to spend some time learning how to do some of these steps if you are not familiar with them.

[Lauda]

Seems like more or less a duplication of the already stickied thread: https://bitcointalk.org/index.php?topic=1631151.0. However, you have some graphics which we do not.

- a USB disk (from 2 GB to 16 GB depending on how you want to approach this). This is the only cost ($10?)

This suggestion is inherently bad, and without backups will lead to a catastrophe. USBs were not meant for: 1) Main storage devices. 2) A lot of operations of any kind. Change that for an external HDD.

[pooya87]

- a USB disk (from 2 GB to 16 GB depending on how you want to approach this). This is the only cost ($10?)

This suggestion is inherently bad, and without backups will lead to a catastrophe. USBs were not meant for: 1) Main storage devices. 2) A lot of operations of any kind. Change that for an external HDD.

this is going to be a very flexible wallet and it is an additional DIY option. there are a lot of details that i just summarized here. such as backups which are obvious part of any kind of wallet.
it also needs some familiarity with linux,... for example changing the way swap works so that it only uses it for extreme situations increases the lifetime of the disk a lot. and with today's modern USB 3 disks, specially some brands the lifetime is extremely long and they are resistant. additionally since this is more of a cold storage wallet, it will be rarely used.

the external HDD is a good suggestion and obviously improves things a lot. but it also costs more and you either have to ignore the extra space or end up partitioning your wallet and use the rest of the space which means it won't be a dedicated device for your wallet only.

[Lauda]

this is going to be a very flexible wallet and it is an additional DIY option.

I don't see how it is any more flexible than an external HDD. The ones that don't have separate AC power are very slim and portable.

such as backups which are obvious part of any kind of wallet.

Making such assumptions is horrendous considering most people do not have or create backups (or at least not proper backups).

...and with today's modern USB 3 disks, specially some brands the lifetime is extremely long and they are resistant.

No.

additionally since this is more of a cold storage wallet, it will be rarely used.

Doesn't matter if its not used or not, it may die from age.

the external HDD is a good suggestion and obviously improves things a lot. but it also costs more and you either have to ignore the extra space or end up partitioning your wallet and use the rest of the space which means it won't be a dedicated device for your wallet only.

$50-$100 is a trivial cost if you need cold storage. You'd have to be an idiot to use a strong cold storage setup for trivial amounts of Bitcoin IMO.

[pooya87]

this is going to be a very flexible wallet and it is an additional DIY option.

I don't see how it is any more flexible than an external HDD. The ones that don't have separate AC power are very slim and portable.

by flexible i meant the steps can be changed. like using an external Hard Disk. or using another linux distro,...
it is a Do It Yourself after all.

such as backups which are obvious part of any kind of wallet.

Making such assumptions is horrendous considering most people do not have or create backups (or at least not proper backups).

yeah, you are right. i usually forget this

...and with today's modern USB 3 disks, specially some brands the lifetime is extremely long and they are resistant.

No.
[...]
Doesn't matter if its not used or not, it may die from age.

yes, the newer models are handling the power much more efficiently this not only decreases the chance of data failures but also increases their lifespan.

the usual lifespan of USB disks is called to be around 10 years (of course it solely depends on the usage).
i currently have my wallet installed on a 10 years old USB 2 disk and i have been using it at least twice a month for the past 3+ years. it is still alive and working fine. if someday it dies (which i am waiting for it before i switch to a 16 GB USB 3.1) i just buy another one and install everything again and recover from the paper which i wrote my seed on 3+ years ago.

for $10 i find my setup pretty good.

the external HDD is a good suggestion and obviously improves things a lot. but it also costs more and you either have to ignore the extra space or end up partitioning your wallet and use the rest of the space which means it won't be a dedicated device for your wallet only.

$50-$100 is a trivial cost if you need cold storage. You'd have to be an idiot to use a strong cold storage setup for trivial amounts of Bitcoin IMO.

i agree, that is a valid option.

[Lauda]

by flexible i meant the steps can be changed. like using an external Hard Disk. or using another linux distro,...

Alright, that does make sense.

Making such assumptions is horrendous considering most people do not have or create backups (or at least not proper backups).

yeah, you are right. i usually forget this

Let's also not forget the group that does make backups (e.g.) but with bad practices (e.g. unencrypted backups).

the usual lifespan of USB disks is called to be around 10 years (of course it solely depends on the usage).
i currently have my wallet installed on a 10 years old USB 2 disk and i have been using it at least twice a month for the past 3+ years. it is still alive and working fine. if someday it dies (which i am waiting for it before i switch to a 16 GB USB 3.1) i just buy another one and install everything again and recover from the paper which i wrote my seed on 3+ years ago.

Well, if we were comparing a single USB key vs. a single HDD setup, the obvious winner would be the latter (the former can't be really relied upon like that, but the latter not 100% either).

for $10 i find my setup pretty good.

It's decent enough, but also somewhat reliant on trust.

i agree, that is a valid option.

Indeed.

[Decoded]

boop.

[HabBear]

The only thing missing is the fact that web wallets often operate in specific companies, so anyone search for a wallet to use will be limited by those that are conducting business in their country.

I'll offer an additional resource to help anyone sift through, here's a site that compares a lot of the different wallets and exchanges, side by side, for you to make a decision. They even tell you which coins beyond Bitcoin are supported.

Check it out >>> https://www.cryptocompare.com/wallets/#/overview

Thanks for the guide there are a lot of new joiners that ask questions about wallets.

They'll find this guide useful, appreciated.

Nice Guide! This will certainly help a lot of new users to help decide about their wallet choices.

Nice guide. Lots of great information.

Very nice guide. Thanks for the effort, I'm sure a lot of people will appreciate it and find this very overview very useful.

Thank you very much for the insight

Coin@coin, Aventhe, OgNasty, redhorse, and acheampong64 if you think this thread is useful you should throw some merit Decoded's way.