Bitcoin Wallet FAQ

Bitcoin Wallet FAQ
In recent weeks, Bitcoin has reached all new highs in terms of both popularity and price. And because of this, a number of people are eager to get in on the action—maybe you’re one of them. Maybe not. Before you can buy Bitcoin, understanding Bitcoin wallets is very important. And we aren’t talking the kind of leather wallet that you can buy at the mall. Below (FYI), I'm going to use the word Bitcoin and Bitcoins interchangeably. 
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What Is A Bitcoin Wallet?
Bitcoin wallets come in different forms. If you want to get technical, no wallet actually contains any Bitcoin. Wallets of any kind productize access and security of the private key.

Remember: 

• The private key Is what gives a person access to the balance of Bitcoin that they have on the Bitcoin blockchain.
• The backup seed phrase gives a person access to a person's bitcoin regardless of the condition of the wallet.
• Guard and secure your private key and seed phrases like your life depends on it. Why? Because that is where you are holding (HODLing) your wealth and savings.

For the non-technical person, there are hardware and software wallets.

• A hardware wallet is a physical device which holds your Bitcoin just a physical wallet holds your cash. These often look like small USB flash drives. You access them by connecting them to your computer, and entering in a PIN number. You also need your private key and/or your Seed Phrase to access your Bitcoin (generally, you'll want to store your Seed Phrase physically far away from your hardware wallet and private key).
• A software wallet (this is not a common term... actually, it's not really a term at all) is a digital wallet which holds your Bitcoin either on an exchange or on a website, but either way it is somewhere in the digital realm and not something you physically store or carry around. Regardless, word of advice to you is don't store your Bitcoins on an exchange. Use exchanges to buy/sell/trade - then get the crypto asset (like Bitcoin) off the exchange and into your own wallet (where you have the private key).
• The golden mantra for Bitcoiners is "Not your keys, not your coins".

Which Is Better?
Well, the word better isn’t necessarily the best word in this case. The real question is, which is safer FOR YOU, specifically. And the answer depends on what you plan to do with your Bitcoin, as both wallets have real risks and benefits. The answer also depends on the kind of person you are and what you can take on in terms of responsibility. The answer depends on what's at stake.

Also, what matters is WHO or what entity has CONTROL or CUSTODY of your Bitcoin. If you use a service like a wallet or an exchange to hold your Bitcoin, that centralized entity has custody of your Bitcoin. NOTE: If you buy Bitcoin through entities like: PayPal, Robinhood ---> THEY have custody of your Bitcoin. You do NOT have the private keys to them (as of the publication of this blog post, neither service provider allows you to take the Bitcoin you purchase out of their wallet gardens). You CANNOT move your Bitcoins out of PayPal or Robinhood. I do NOT recommend PayPal/Robinhood for buying Bitcoin. (see previous article -- best places to buy Bitcoin as a beginner are Swan Bitcoin, CashApp, Coinbase (tho it has higher fees - usually I'll point folks to Coinbase PRO if you want to use Coinbase....). 

If you have Bitcoin in Coinbase, BlockFi, Bittrex, Binance, Celsius, Jaxx or any of these centralized applications and exchanges (aka software), THEY have custody/control over your Bitcoin. Again, you don't have the private keys to your Bitcoin, You CAN move your Bitcoins in/out of these applications as you choose, as long as there are no issues with your 1) identity, 2) relationship with the government, etc.... If anything happens to these companies, your Bitcoin is at risk. If these centralized companies are attacked, your Bitcoin is at risk. If you are in trouble with the government for any reason, your Bitcoin is at risk. So please act accordingly. 

What About Hardware Wallets?
Unlike "software wallets", hardware wallets are nearly unhackable. Unless someone has your Seed Phrase, they cannot get access to your wallet. Not only that, but if you physically lose your hardware wallet, you can buy another one, enter your Seed Phrase (which is like a 12-24 word password) and recover all of your Bitcoins.

Here’s the problem. If you lose that Seed Phrase, which is assigned for you by the device, you will not, ever, ever, get your Bitcoins back. They are gone forever. This is what people mean when they say they’ve lost access to their Bitcoins—they’ve locked themselves out of their hardware wallets forever. And if you haven’t seen the news lately, there are people all over the world ripping their hair out at the passwords they lost to Bitcoins that are now worth millions.

Hardware wallets are generally safer if you plan to hold Bitcoin for a long time (and you can write down/remember a 12-24-word password, aka the Seed Phrase, and not lose it). Where a hardware wallet is kept offline, it is also known as cold storage.

If you are going to go the hardware wallet route, I generally recommend Coinkite, Trezor or Ledger as they are generally easier to set up and use for hardware wallets. (Side note, Ledger has gotten hacked recently - so they leaked ALL of their customer data recently. Hopefully they've increased their security measures and fixed their vulnerabilities since then...). Don't buy them anywhere. If you buy them on Amazon, make sure you're buying from the specific company directly. Do not buy from a second hand or grey market. Trezor and Ledger are also the largest players in the space. Whatever you do, find a way to remember that passcode and keep it safe (and store it physically FAR AWAY from your hardware wallet)! VERY IMPORTANT.

What About "Software" Wallets?
There's no real such thing as "software wallets". The term that matters more is Cold wallet versus a Hot wallet:

• Hot wallets are connected to the internet.
• Cold wallets are NOT connected to the internet.

Generally, if you're not using a hardware wallet, it's all software (or seed phrases). Also, most of the applications in the space have very minimal customer support... so don't rely on being able to get good customer support in this space.

Generally, there's always a risk of an exchange or wallet provider getting hacked (you are responsible for double checking when you decide which exchange or wallet application to use), and this is still a risk you have to take when choosing a  wallet. The risk comes from "centralization" -- most exchanges and wallet providers are centralized private companies. This means they are literally a "honey pot" for the bad guys to attack (like we've seen time and time again in the centralized world: Target, Marriott, Facebook, Equifax, etc...)

What are the benefits of NOT using a hardware wallet? Well if you plan to trade cryptocurrency on a daily basis and often, it will get quite annoying to transfer it on and off the exchange to your hardware wallet constantly. Make sure you choose a reputable wallet provider, because they aren’t all the same. Then again, the annoyance might be a good thing for that extra level of security.

Which Wallets Are The Best?
Again, there is no "best wallet".  Again, the real question is, which is SAFE FOR YOU, specifically. And the answer depends on what YOU plan to do with your Bitcoin, as different wallets have different real risks and benefits. The answer also depends on the kind of person you are and what you can take on in terms of responsibility.

I have heard of people recommending the Coinbase wallet (Coinbase wallet was a spinoff by "Toshi" of the real Coinbase market/exchange.... so it's really confusing. Be careful), or Exodus, as these are supposedly fairly easy to use. I personally think their products are not easy to use. I'm not a user of either of them. There's a Bitcoin Wallet wizard you can try out: https://bitcoin.org/en/choose-your-wallet. 

Some quick recommendations:

• Bluewallet is the respected non-hardware wallet these days. It's open source. It's mentioned and endorsed a lot these days. You'll have to try it for yourself - download it and play with it. It's on iOS.
• What I do recommend for buying Bitcoin (see previous article) is: Swan Bitcoin (the one I recommend the MOST), Coinbase (though higher fees and terrible customer support), Coinbase PRO (better fees than the consumer Coinbase), CashApp, BlockFi....

You can trade your crypto assets on any exchange you are using to trade it. The decision is yours. Know that exchanges are more likely to be targets to hacks - so best practice is to NOT leave your crypto assets on an exchange in terms of storage. 

There are a number of combo wallets out there which employ a little bit of both technologies. These are also an option, but are generally more complicated than just picking one or the other.

So Where Should I Keep My Bitcoin?
Well, if reading this far hasn’t answered your question, this is entirely up to you and what you feel is a greater risk for yourself personally: is it losing your password or is it being the victim of a hack? Are you better at keeping your passwords secure and safe? Are you good and not losing your car keys? Only you know what's best for you. Again, do not store your Bitcoin on an exchange - it is generally NOT a best practice.

Objectively, there is no "best wallet". There is only "the best wallet for you", based on how you want to handle and store (or not store) your wealth, based on your personal needs. At this point in the Bitcoin infrastructure buildout, there is basically a solution to fit every person's individual needs. It's a big spectrum of needs and wants - and a person must go and get it to learn.
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Generally, I would advise that you spend the time to DO YOUR OWN RESEARCH. Self education is very important in this space. Learn. Learn as much as you can. LEARN. Watch and listen to videos. Read. Don't do anything you are unfamiliar or uncomfortable with - feel free to reach out to others in the community to verify or ask questions. But ONLY YOU can make the ultimate decision as to where you would feel safest storing your Bitcoin. 

Hope that helps!