The most secure form of Bitcoin wallets
Mobile wallets are very convenient and designed to provide as much security as possible in an insecure environment. However, large amounts should not be stored on a mobile wallet unless it is used in conjunction with a hardware wallet, which we will discuss in a moment.
The most secure form of Bitcoin wallets
Now let’s talk about the most secure form of Bitcoin wallets, cold storage wallets. Cold storage refers to any type of wallet that is independent of any internet connection and therefore cannot be remotely hacked. Some examples of cold storage wallets are hardware wallets, paper wallets, and brain wallets. Let’s get past them now. Paper wallets are simply pieces of paper on which the private key or seed is written.
Tips to protect Bitcoin wallets from hacking
By keeping your private key on a piece of paper, only someone who has physical access to that piece of paper will be able to steal your Bitcoin. However, paper wallets are easily destroyed and hence it is advisable to create multiple copies so that if you lose one of them, your bitcoins can still be recovered. Another thing to keep in mind is that to send the bitcoins in your paper wallet to someone else, you will have to import the private key into some form of digital bitcoin wallet, as this is easily explained in one of the many tutorials on the various sites.
Hardware wallets are secure and cannot be hacked
The next form of cold storage is hardware wallets, which are physical devices that store your private key securely so that it cannot be hacked even if your device is compromised by malware. You can even use it with a public computer that you don’t trust.
Most hardware wallets provide an initial backup in case the device itself is lost or stolen, and to send your bitcoins to someone with a hardware wallet, you will need to connect your e-wallet to a computer and use some type of web page that allows control of the wallet.
Hardware wallets provide the optimal combination of security and ease of use. Their only limitation is that you need to keep your hardware wallet with you at all times to send coins. Finally, we come to the brain wallets. Brain wallets are just a way to generate a private key from a pre-defined text or set of words.
So instead of getting a randomly generated seed, you decide on the passphrase yourself and use some basic algorithms to generate a private key from that passphrase.
Bitcoin wallets – Multisig
I want to talk about another important feature that some Bitcoin wallets have – Multisig, which is a wallet that allows sending bitcoins only with the consent of enough private keys, from a set of pre-defined keys.
Let’s say Alice, Bob, and Charlie all want to open a business together and invest some of their bitcoins — but none of them want just one person to have the private keys to that money. So they each get one key and use a multisig wallet which requires two out of three of these keys.
This way none of them could escape with the money alone, but they also didn’t need the three of them to pay the expenses. For example, if Alice wants to run away with the money, she can’t because she only has one key. But if Bob is missing and Alice and Charlie want to pay the expenses, they can do so using their keys. Multisig doesn’t have to be just two out of three – it can be almost any combination.
For example, a couple wants to have a joint account and decide that they can only spend money if they agree to do so, or a company’s board of directors only allows payments by majority vote. Multisig is often used for escrow services where two parties decide on a transaction that requires 2 out of 3 keys.
How should you choose a Bitcoin wallet?
The first thing you need to know is that different people will use different Bitcoin wallets for different purposes, for example, if I need to securely store a large amount of Bitcoin, I will use a different wallet than if I just want to have some small bitcoins to pay for. A cup of coffee.
Wallets typically vary on a scale of security versus comfort and you need to decide where you want to be on that scale. Some questions to ask yourself include:
How many bitcoins will I store?
How often will I use the wallet?
Can I pay for a hardware wallet?
Do I need to carry a wallet with me?
Do I need to share the wallet with someone else?
Am I tech-savvy?
How much do I value my privacy?
Do I trust myself to protect my wallet or do I want to entrust a third party to do so?
Depending on the answers to these questions, it will be easier for you to choose a wallet. Most of the popular Bitcoin wallets are listed on the Bitcoin Wallets page, so now it’s just a matter of choosing the best wallet that suits your needs.
