Bitcoin was founded in 2009 by either a single programmer or a group of programmers who used the pseudonym Satoshi Nakamoto.
Bitcoin is considered by many analysts, industry leaders, and investors alike to be the first recognized cryptocurrency. And over a decade later, everyone looks to the rises and falls of Bitcoin to decide when to buy and sell in the volatile cryptocurrency market.
Of course, there are tricks to cleaning up in the crypto world, and most of the high rollers don’t just keep their investments on the crypto exchange—they incorporate a cryptocurrency wallet. But what is that?
What is a Bitcoin Wallet?
Bitcoin is managed by the exchanges that allow Bitcoin or cryptocurrency transactions and the investors themselves, whether they just dabble or are serious about crypto investments.
But whether you keep your Bitcoin access purely online or secure that access offline, a Bitcoin wallet is essential for keeping track of your cryptocurrency until you’re ready to use it. That could be selling it or purchasing goods and services that allow digital currency as payment.
Keep in mind that you’ll use a Bitcoin wallet to store not just your Bitcoin but also other crypto. At this time, there are no Bitcoin wallets solely for Bitcoin, so anything marked as a Bitcoin wallet is also a cryptocurrency wallet.
The exclusion would be if Bitcoin were the only cryptocurrency sold at the specific exchange. And if that’s the case, you need to join a more legitimate stock or crypto exchange. But what are crypto wallets? They’re physical and digital storage solutions for crypto keys so you can make safer and more secure transactions with your cryptocurrency investments and crypto assets.
How Does a Bitcoin Wallet Work?
Images of cryptocurrency give new investors the impression that they’re investing in physical coin-like currency with images scrolled into the physical bill. But crypto is not physical currency.
Instead, it’s virtual or digital currency that isn’t worth anything until it’s sold or traded for government-recognized physical money. In other words, your Bitcoin is worthless if it just sits on the crypto exchange and is never exchanged into USD (or whatever country’s currency applies to the seller).
Why Do You Need a Bitcoin Wallet?
So then, if cryptocurrency is digital, why are crypto wallets and Bitcoin wallets necessary? Cryptocurrency is not physical, and it can’t be accessed by just anyone since specific security measures are often in place. Crypto is decentralized, which means physical banks aren’t involved. However, all that information is kept and maintained online in hot storage wallets.
All crypto is programmed with specific private keys needed by the investor and crypto exchange alike. Crypto exchanges hold their own keys on their websites, and the containment or organization of the listed currency is called a hot wallet. It is the digital storage of a crypto exchange member’s accumulated cryptocurrency and is different from hardware wallets.
All cryptocurrency investors must have their own digital crypto wallets on whatever exchanges they use. And in most cases, digital crypto wallets, hot wallets, and a hot storage wallet are suitable enough for beginner crypto investors who want to protect their crypto assets and digital currencies.
However, the cryptocurrency market is notoriously volatile. Bitcoin is considered the king of digital currency since it sets the pricing standard for almost all other crypto brands. And Bitcoin’s worth alone has been known to fluctuate thousands of dollars in a single day and tens of thousands of dollars within a single month. Now, imagine you’re not just dabbling with a couple of hundred dollars worth of Bitcoin, but you’ve invested thousands, hundreds of thousands, or even millions of dollars in Bitcoin.
Hardware Wallets Versus Exchange Storage
A heavy fall in Bitcoin could send you into cardiac arrest, but a steady rise would set anyone on edge and keep them glued to their seat.
Unfortunately, steady cryptocurrency soars also get the attention of hackers. In fact, according to data research, over $5 billion in crypto has been stolen by hackers since 2011. And with the fluctuations in the market, that translates to nearly $61 billion USD in current value.
The right crypto wallet, primarily a hardware wallet or a cold storage wallet, can help keep control of your keys and coins. Just weigh the pros and cons to decide on the best crypto wallet for your specific needs. The safest crypto wallet will always be a desktop and mobile wallet or a hardware wallet because your public and private keys reside on your desktop computer or another physical device.
What Should I Look for in a Crypto Wallet?
Crypto wallets are divided into two categories: hot storage and cold storage. Other terms for those are hot wallets and cold wallets.
These are digital storage containers for cryptocurrency and the private keys required to access that digital or virtual currency. All crypto exchanges include hot wallets for their members.
There’s no way to access the cryptocurrency without the hot or digital storage option. Hot wallets are complimentary and part of the website service. However, certain digital or hot storage is better than others. The best crypto wallet for your specific needs might be an exchange hot wallet or a software solution in the form of a wallet app.
A cold wallet is an actual physical device utilizing cold storage (or offline storage facilitation). Also known as a hardware wallet, it is usually small enough to fit in your hand or something that connects to a tech device via a USB connection.
All cold storage allows the owner to store and access their private keys for their Bitcoin and other cryptocurrencies but is limited by what crypto it supports. So far, they all support Bitcoin, which could make a cold wallet the best Bitcoin wallet for your needs. But unless an exchange offers a hardware wallet as a giveaway, cold wallets are not free. And the prices can range between $50 and over $200.
Which Bitcoin Wallet is the Best?
Legitimate and secure crypto exchanges provide hot storage for their active members. But well-known exchanges are also prone to hacking attempts. Therefore, the best hot wallets are decentralized or not connected and operated by a specific exchange. They are, however, still hot storage since it’s digital storage. The best type of wallet to use for protecting your digital assets and to trade Bitcoin is an offline wallet.
The Best Software & Hot Crypto Wallets
- The Coinbase Wallet app was introduced in April 2021. Like Coinbase itself, it’s a hot wallet since it’s digital storage. But unlike the Coinbase exchange, the wallet app is noncustodial. That means the user is the only one in possession of private keys. In addition, members can enter their specific 12-word recovery phrase to recover forgotten keys, which adds even more security. The Coinbase Wallet app is excellent for crypto beginners considering their crypto wallet options but like the idea of a wallet app.
- The Robinhood crypto wallet is being rolled out. Robinhood customers are joining the waitlist with great anticipation. If you’re not a Robinhood app user or customer yet, you can get Robinhood and secure your spot in line. Among the crypto wallet’s functions, you’ll be able to send coins to other wallets and receive supported cryptocurrencies in yours.
- The Mycelium wallet is one of the oldest, most well-known, and heavily used wallet apps. It’s noncustodial and fully open-sourced so that you can use and access it anywhere. This is a mobile-only wallet and has no desktop version. It’s excellent for anyone focused on the leading crypto players. It serves its purpose as the best bitcoin wallet in its class because it focuses on about a dozen crypto types and ERC coins or tokens. Customer service options are also limited. But this is still one of the best crypto wallets for the digital wallet crowd.
- Exodus works as an actual desktop hot wallet. It’s also compatible with its own wallet app so that you can access and use your crypto on the go. Exodus supports over 140 coins and tokens.
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- SafePal: SafePal starts at about $5 and has some bells and whistles to make any level of crypto investor smile. The cold wallet supports 21 blockchains and can hold at least 10,000 tokens. SafePal can be your best crypto wallet option if you’re a beginner or intermediate investor.
- Trezor T: TheTrezor T is a pricey cold wallet, costing around $200. But it supports tons of coins and blockchains. Trezor T also has several bells and whistles, including its smaller size, a touchscreen that adds an extra level of security, and mobile app accessibility.
- Ledger Nano: TheLedger Nano is the best crypto wallet for most people looking for a cold wallet. It comes in two styles, ranging from $59 to $159, installs either 3 or 100 apps, supports up to 5,500 coins or assets, and connects via USB. The advanced version connects via Bluetooth, so mobility isn’t an issue.
Which Bitcoin Wallet is Best in Canada?
Most of the better US-backed and offered crypto wallets are also available in Canada. The top two higher-end cold storage wallets mentioned above, the Ledger Nano and the Trezor T, are also sold, delivered, and extremely popular in Canada. But Canadian investors also love their mobile app options. Some of the best mobile wallets in Canada include:
- BRD: BRD supports over 70 cryptocurrencies and is available in 140 countries.
- Exodus Wallet: Exodus is great for beginner investors in Canada. And Exodus has partnered with Trezor. So you can easily switch between hot and cold storage or seamlessly advance to cold when you’re ready.
- ZenGo: ZenGo supports over 70 cryptocurrencies and uses biometrics as an extra safety layer. That just means the mobile app can quickly restore your wallet if something happens and you’re accidentally locked out.
The Final Verdict on Bitcoin Wallets
So then, do you really need a Bitcoin wallet? Well, since all exchanges require at least a hot wallet for cryptocurrency trading, the short answer is yes. But the best cryptocurrency wallet for you totally depends on your investment intentions. Cold wallets are great, but they’re not always necessary unless you’re investing in a lot of crypto or unless the crypto is the majority of your investments. They are fun gadgets, though. So consider your actual needs and shop accordingly.
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