A Bitcoin wallet closely resembles your bank account. It lets you send, receive and store bitcoins. There are several types of wallets out there to choose from, and they vary in features and devices on which they are used. It is advisable to know these categories so that you always choose one that suits you.
1. Cold wallets and Hot wallets
All wallets are classified as either hot or cold. One that is connected to the internet or is online is said to be ‘hot’. On the other hand, ‘cold’ implies it is offline or disconnected from the internet.
‘Cold’ is considered the most secure, thus, recommended for storing large amounts of bitcoins. ‘Hot’ is suitable for frequently accessed funds. Therefore, the best strategy is to use cold storage for long term holdings and a hot wallet for regular use.
2. Desktop wallets
They are designed to be downloaded and used on laptops and personal computers. They are easy to access and use even when the computer is not connected to the internet.
They are available for different operating systems – Windows, Mac OS and Ubuntu. Armory is the most recommended desktop wallet, especially due to its security features. Others are Multibit, mSIGNA, and Hive.
3. Mobile wallets
We use phones for most tasks these days and bitcoin wallets tailored for your Smartphone is therefore very convenient. Mycelium and Blockchain are both available on Android and IOS. For Blackberry, Bitcoin Wallet is one of the few available.
Perhaps, one of the most handy features on mobile wallets, apart from enhanced security features, is the QR code capability. It enables instant payments.
4. Online web wallets
These are provided on the cloud by third party wallet service companies. The wallets on these platforms are only accessible through an internet connection. Coinbase and Circle are some of such service providers. Bitgo is trusted by institutions for its vault services that include co-sign to lock accounts.
On the other hand, multi-signature wallets from Coinkite let you decide the number of cosignatories to have one account.
5. Physical wallets
If you thought bitcoins were digital only, then think again. Paper wallets can securely hold your bitcoins in cold storage form for a long time. You can store this form of wallet it in a safety deposit box along with your other valuables.
In order to generate a paper wallet, you use sites such Bitaddress.org or Blockchain.info. Once they are generated, you print them out on a piece of paper.
6. Bitcoin Clients
These are the original bitcoin wallets used by the pioneers of the currency. Computers installed with these wallets form part of the core network and thus have access to all transactions on the blockchain.
BitcoinQt, was the first ever built bitcoin client wallet. Many believe it is what Satoshi Nakamoto used. With it, you play a role in the overall state of the network. Another with richer features is Electrum, a lightweight client.
7. Hardware Wallets
Trezor and Ledger HW.1 are quickly becoming popular as portable physical vaults. They are incredibly small devices. They are secure for storage, sending and receiving transactions online. Their developers make use of top grade cryptography and take them take through continual scrutiny.