How to Get a Bitcoin Wallet: Everything to Know
By Beluga Research September 11, 2023
- Learn how to choose a Bitcoin wallet, the digital tool that enables users to safely store, send and receive bitcoin
- Cryptocurrencies like bitcoin operate on decentralized networks called "blockchains," which allow for fast, secure, peer-to-peer (P2P) transactions worldwide
- Before getting involved with Bitcoin, users will first need a bitcoin wallet, which can be a software application, a hardware device or a paper wallet
- Bitcoin wallets offer advantages including security, accessibility and decentralization, but also have disadvantages such as irreversibility, price volatility and a learning curve
Cryptocurrencies like Bitcoin operate on decentralized networks called "blockchains," which enable fast, secure, peer-to-peer (P2P) transactions worldwide. This capability makes it possible for individuals, including those who are underbanked or unbanked, to participate in the global economy. Bitcoin's borderless and decentralized nature allows investors to buy, sell, or trade it without relying on banks or other traditional financial institutions. They do however, need a bitcoin wallet to safely store, send and receive bitcoin. For beginner investors, choosing a bitcoin wallet can be overwhelming given the many options available on the market. When exploring options, investors should consider their specific needs as well as other factors like convenience, security, and ease of use.
How to Get a Bitcoin Wallet: Everything to Know
First-time investors generally find Bitcoin to be the easiest onramp into the crypto realm. To get started, investors first need to choose a bitcoin wallet. This can be either a software application or a physical device that allows bitcoiners to securely store their private keys, as well as to send and receive bitcoin from other bitcoin investors.
Here is a step-by-step guide on how to get a Bitcoin wallet:
- Choose a Wallet Type .There are different types of Bitcoin wallets, each with specific advantages and considerations. The main types include "software wallets," "hardware wallets" and "paper wallets."
- Software Wallets . These are applications installed on computers or mobile devices. They offer convenience and accessibility but are susceptible to malware and hacking risks.
- Hardware Wallets . These physical devices are considered the most secure of the wallet options because they store the investor's private keys offline. By never being connected to the internet, hardware wallets greatly reduce the potential of the private keys being compromised.
- Paper Wallets . A paper wallet involves generating a Bitcoin address and the corresponding private key on a physical piece of paper. While secure from online attacks, paper wallets require careful handling and protection from physical damage or loss.
- Research and Choose a Wallet Provider . Users should research and choose a reliable wallet provider once they have decided on the type of wallet that suits their needs. Users should also look for wallets with a good reputation, positive user reviews and strong security features, and ensure that the wallet provider implements robust security measures to protect funds.
- Download or Purchase the Wallet . The wallet application for software wallets can be downloaded from the official website or app store. Users must ensure that they download from a trusted source to avoid malware or fake wallets. Hardware wallets need to be purchased only from reputable vendors or official resellers.
- Set Up and Secure the Wallet . Once a user has chosen a Bitcoin wallet, they'll need to follow the provided instructions to set it up. This usually involves creating a strong password and, in some cases, generating a backup "seed phrase." The backup seed phrase is a series of words that can be used to recover the wallet in the event that it is lost or damaged. To keep the wallet secure, users should enable additional security features like two-factor authentication (2FA) or biometric authentication if supported. Wallet software should also be regularly updated to obtain the latest security patches.
- Receive and Send Bitcoin . Once a Bitcoin wallet is set up and secured, users can start receiving bitcoin. To receive bitcoin, the "Bitcoin address," which is a long string of alphanumeric characters associated with the wallet, must be provided to the sender. To send bitcoin, the recipient's Bitcoin address must be entered, along with the amount the user wishes to send.
A Brief History
While there are myriad cryptocurrencies that comprise today's crypto market, Bitcoin was the first. Often referred to as the "king of crypto," Bitcoin launched in 2009 and was the brainchild of an anonymous person or group using the name "Satoshi Nakamoto." Satoshi outlined the vision for Bitcoin in a white paper entitled, Bitcoin: A Peer-to-Peer Electronic Cash System. The white paper completely disrupted traditional finance and marked a significant milestone in the development of decentralized digital currencies. Though developers create new cryptocurrencies with a unique purpose and characteristics in mind, they still rely on the same technology that underpins Bitcoin. This is because blockchain technology is decentralized, making it inherently more transparent and secure than fiat currencies. By eliminating the need for central authorities and distributing power and control across a network, decentralization ensures that no single entity controls the network, making Bitcoin resistant to censorship and manipulation.
To safely and securely store, send and receive bitcoin, an investor should first choose a software or hardware Bitcoin wallet.
A software wallet, which can be installed on a computer or smartphone, are typically convenient and user-friendly, making them popular among beginners. Subsets of software wallets include "desktop wallets" and "mobile wallets."
Desktop wallets are installed on personal computers, providing users with complete control over Bitcoin holdings. They offer higher security than mobile wallets since they are less vulnerable to malware or hacking attempts. Popular desktop wallets include Electrum, Exodus and Bitcoin Core.
Mobile wallets like Mycelium or Trust Wallet are designed for smartphones and offer users both portability and accessibility, making them particularly useful for frequent, on-the-go transactions.
Another option is a hardware wallet, a physical device that stores the user's private keys offline, making them immune to malware attacks. For this reason wallets like Ledger Nano S Plus, Trezor and KeepKey are considered one of the most secure methods for storing bitcoin.
Bitcoin wallets possess several unique aspects that distinguish them from traditional wallets or bank accounts. For example, creating a Bitcoin wallet generates a pair of cryptographic keys: a "public key" and a "private key," that when combined, grant the user the ability to send and receive crypto assets.
The public key serves as the wallet's address and allows the owner to receive bitcoin from others. The private key, as the name suggests, must be kept confidential, as it is used to sign transactions and prove ownership of the bitcoin associated with the wallet.
Another unique aspect of Bitcoin wallets is blockchain synchronization. Since the Bitcoin blockchain acts as a public ledger for all historical transactions to date, users of software-style bitcoin wallets must be aware of this to ensure they're viewing their latest account balance and transaction history. Blockchain synchronization with a bitcoin software wallet may take time, especially for users with slower internet connections or those who have not synced their wallets for an extended period. During synchronization, the wallet downloads and verifies all transactions that have occurred since wallet creation. This process ensures the wallet has an up-to-date copy of the blockchain and can accurately calculate the user's balance.
Lastly, it is important to note that Bitcoin wallets are non-custodial– they give the user complete control of their funds. This concept is in itself, disruptive, as with traditional bank accounts, a user's funds flow through and are controlled by a third party. This self-custody aspect is considered to be one of the most empowering benefits of Bitcoin among Bitcoin enthusiasts, though it's important to recognize that with greater financial autonomy comes greater responsibility. If an investor mismanages or loses their funds, there is no central authority they can enlist for assistance. So while decentralization is meant to increase security and trust by eliminating intermediaries, there's also an obvious downside to this approach: if things go wrong it's difficult or often impossible to recover lost bitcoin funds.
- Security . Bitcoin wallets use advanced cryptographic techniques to protect private keys and ensure that only the rightful owner can access funds.
- Accessibility . With a Bitcoin wallet, users can access funds from anywhere in the world with an internet connection, enabling seamless and convenient transactions.
- Control . Bitcoin wallets give users complete control over funds, allowing them to send, receive and manage them without relying on intermediaries like traditional banking systems.
- Privacy . Bitcoin wallets offer a level of privacy by allowing the anonymous generation of wallet addresses, providing pseudonymity for those who value financial privacy.
- Decentralization . Bitcoin operates on a decentralized network, and Bitcoin wallets are decentralized as well, giving users full control of funds without relying on a centralized authority.
- Irreversibility . Once a bitcoin transaction is confirmed on the blockchain, it is nearly impossible to reverse, making it challenging to recover funds sent to the wrong address or lost to scams. As a result, double-checking transaction details is crucial.
- Price Volatility . Bitcoin's value can fluctuate significantly within short periods. While this presents investment opportunities, it also poses risks. Being aware of price swings is vital when managing bitcoin holdings.
- Learning Curve . Setting up and using a Bitcoin wallet can be daunting for cryptocurrency newcomers. Understanding technical aspects like private keys and backups may require a learning curve. Thus, it is essential for users to educate themselves on wallet security and best practices.
- Potential for Loss . Bitcoin wallets are secure but not immune to loss. Forgetting wallet passwords or losing backup phrases can result in permanent fund loss, so keeping secure backups and being cautious of fraudulent activities is crucial.
- Limited Acceptance . Bitcoin's acceptance as a payment method is growing but not universal. Not all merchants and service providers support bitcoin transactions, limiting usability. However, more businesses are adopting cryptocurrencies.