Saturday, November 18, 2017
Bitcoin

What’s the Best Bitcoin Wallet?

by John Divine

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Bitcoin is hot. What once cost 6 cents in 2010 hit highs above $7,400 in 2017. If you own the cryptocurrency, or are even thinking of buying some, you’ll want to find the best bitcoin wallet you can.

Wallets are where the currency lives.

So, with blockchain technology here to stay, what’s the best bitcoin wallet for 2018 and beyond? With an emphasis on safety, here are the top five wallets and wallet types.

No. 5: Coinbase (online exchange). Online exchanges are, by and large, less secure than the methods described below. But Coinbase seems to have learned from the lessons of its predecessors, and is one of the biggest bitcoin exchanges in the world. It’s also user friendly; not only can you buy, sell, exchange and trade bitcoin on Coinbase, but you can store your bitcoin in a wallet there, too.

But the risks of keeping bitcoin on the same site where you buy it are steep, and there’s a poor track record.

“There’ve been many incidents of those types of service providers collapsing in the middle of the night and people losing serious amounts of money. Mt. Gox being a great example there,” says Andrew Ittleman, founder and partner of Fuerst Ittleman David & Joseph, a law firm in Miami.

In 2014, Mt. Gox was the Coinbase of the world, being the go-to exchange for excited new cryptocurrency investors. That is, until February of that year when about 850,000 bitcoin vanished from its coffers – a haul that works out to about $6.29 billion at today’s prices.

In 2016, another hack took the Bitfinex exchange platform for 120,000 bitcoin, a $75 million score that would be worth more than $890 million by 2017.

Despite the tainted history of its predecessors, Coinbase’s ease of use, a more secure storage option called “Vault,” and two-factor authentication put Coinbase as the best bitcoin wallet provider among the exchanges.

No. 4: Blockchain.info (online wallet). Exchanges are ripe pickings for ambitious hackers. Web-based wallets can pose some security and hacking risks too, but they don’t have quite the glaring target on their backs that exchanges do. Nor do they have the nightmares of Mt. Gox and Bitfinex hanging over them.

Claiming to be the “world’s most popular digital wallet,” Blockchain.info boasts more than 15 million wallets and has supported more than 100 million transactions. Security is a top priority, and with many longtime cryptocurrency enthusiasts comfortably keeping their spoils there for years, even as Mt. Gox and Bitfinex were breached, it would have to be.

For the extremely technologically impaired in society, web-based wallets are just an additional step of complexity – but that’s the trade-off you get for additional security, and it’s a trade-off that continues as we proceed to the best bitcoin wallet available.

No. 3: Electrum (software wallet). Electrum is a popular, free storage option in the bitcoin community, and is one of the most, if not the most, well-respected desktop storage apps out there. It’s been around since 2011 and is also available for mobile, though Apple Inc. (Nasdaq: AAPL) users are out of luck – to date it’s only supported by Android.

Electrum gets high marks for its ease of use and user interface, which is always nice, but the real reason it’s the best bitcoin wallet for desktop is its safety and reliability. Like any desktop wallet that’s worth its salt, users get to control their private key; Electrum doesn’t know what it is. Since your private key, a long string of letters and numbers, gives you access to your bitcoin, you need to keep that, you know, private.

Many online wallets and online exchanges don’t give you ultimate control of your private key, adding an extra layer of risk. You have to both trust the counterparty is a good actor, and hope their servers don’t get hacked, if that could compromise the service or your information.

Electrum also boasts two-factor authentication, and supports hardware wallets and cold storage – techniques that are further detailed below.

No. 2: Ledger or Trezor (hardware wallets/dongles). When you start thinking about using hardware storage solutions for your cryptocurrency, you know you’ve gotten serious. These dongles both make the best bitcoin wallet list because of their safety and mobility. Plus, they’re good enough for professional investors.

“We have a little bit of experience in this area and prefer using Trezor and Ledger Nano S,” says Peter Keenan, director of investments at Hehmeyer Trading + Investments, headquartered in Chicago.

“Both wallets are ‘cold storage’ wallets which we highly recommend. Cold storage eliminates counterparty risk and greatly reduces cybersecurity risk,” Keenan says. “Counterparty risk refers to the risk of losing your bitcoin to the exchange where you bought your bitcoin due to nefarious acts like hacking – Mt. Gox as an example.”

The downside of these solutions? First, they’re not free, like all the previous wallets mentioned. Trezor’s base model costs 89 euros, while the Ledger Nano S costs 58 euros. Both have fancier solutions that cost 229 euros (Ledger Blue) and 139 euros (Trezor model T).

No. 1: Paper wallet or other cold storage. A paper wallet is simply a document that contains all the information you need to generate the bitcoin private keys you need. It often takes the form of a piece of paper with a QR code that can be scanned into a software wallet when you so desire. By storing your bitcoin offline, trusting nothing and no one but yourself, and you have all the information you need to control and access your bitcoin, you’re using the strongest “cold storage” method out there.

“I recommend using a paper wallet so you have a physical backup of the private key,” says Ryan Spanier, director of research at Kudelski Security.

“Be sure to generate it using a clean system, such as a Linux live CD. Store this in a safe place, such as a safe or safety deposit box,” Spanier says.

The incremental complexity and technological know-how needed for this method are both downsides to the paper wallet approach. Cold storage solutions and hardware wallets are less nimble than other options, too; if bitcoin were crashing, for example, you might find yourself slower to the draw than if you merely kept your bitcoin on a site like Coinbase.

Sure, paper wallets may elicit images of a tin foil hat-wearing paranoid, but the truth is that a paper wallet is the best bitcoin wallet for 2018 and beyond because it’s the safest, and in the crypto space the value of safety is – or at least should be – placed at a premium.

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