There are a few options available and each provide different ways to store and access your digital assets like bitcoin. There are three specific categories of digital wallets available in the world.
- Software (desktop, mobile or online) 2. Hardware 3. Paper
Software Wallets, broken into 3 categories below:
a – Desktop wallets are downloaded and then installed on an individual computer. This wallet does offer high level security however if the computer were hacked or compromised by a virus, there is a possibility of losing the funds stored in the desktop software wallet.
b – Mobile wallets run on an app on your mobile phone. This type of wallet can be appealing to some because your digital currency is available in the palm of your hand and can be used at stores that accept digital payment. This is considered by some the least secure way to store coin due to the possibility of hacking as well as losing or damaging the device.
c – Online wallets run in the cloud and can be accessed from any device anywhere at anytime. Online wallets store the wallets private keys and some people view this as making the wallet more susceptible to hacking attempts and theft. So if an online wallet is chosen, selecting one that requires you to verify your identity & comply with Anti-Money Laundering/Know Your Customer laws (AML/KYC laws) is best. Coinbase for example also stores 98% of their clients digital assets in offline wallets and the other 2% is covered under their insurance policy which covers the clients assets in case of a security breach within their database.
Hardware Wallets are unique in the sense that you physically hold the private keys to your wallet in your hand. It looks like a small usb drive. They interact with a number of interfaces and can support multiple digital currencies, not just bitcoin. Once plugged in, the holder of the wallet simply enters a pin-code, amount to transact and hits send. So the hardware wallet still makes making online transactions possible by simply plugging it into the computer usb drive, but when unplugged, the assets are now being stored offline which adds an extra layer of security against online hackers and such, therefore increasing security of the wallet. The banner below with the nano s advertised is an example of one of the best hardware wallets available. Clicking the banner below will take you direct to the secure ledger wallet shopping website.
Paper Wallets are simple to use and also provide a very high level of security compared to other wallets. It literally is a physical copy or printout of your public and private keys that you store in your home, safe or wherever you wish. The paper wallet software generates a public address that you use to transact over the blockchain but you are the only one that can see your private address for the paper wallet and it should never be stored on your computer as that completely defeats the purpose of having the highly secure ‘paper wallet’. Transferring Bitcoin or any other currency is accomplished by the transfer of funds from your software wallet to the public address shown on your paper wallet. Alternatively, if you want to withdraw or spend currency, all you need to do is transfer funds from your paper wallet to your software wallet. This process referred to as ‘sweeping,’ can either be done manually by entering your private keys or by scanning the QR code on the paper wallet.
The reality is, if you choose to use an online wallet there are inherent risks that can’t always be protected against. But the same can be weighed against an offline or paper wallet in the event of not having a backup, robbery, house fire or the dog ate it ect...
