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| HOW YOU CAN SET UP A BITCOIN WALLET IN LESS THAN 2 MINUTES |
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| WHAT IS THE MOST HIGHLY RECOMMENDED BITCOIN WALLET SERVICE ? |
THE MOST COMMON TYPES OF BITCOIN WALLETS
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Custodial
crypto exchanges and wallets: Many crypto exchanges and/or wallets are custodial, which
means the exchange controls all of the users’ private keys to their crypto
wallets. There are advantages and disadvantages to using a custodial exchange
or wallet. Often custodial wallets are used out of convenience or habit.
Traditional banks are custodial because they control your funds and you need to
go through them to get access to your money. Crypto exchanges and wallets are
similar to traditional banks in set-up and execution. Instead of utilizing the
decentralized architecture outlined above, centralized wallets and exchanges
are more like massive databases or accounts. This centralization creates a
massive attack surface for hackers or thieves. The dangers of storing account
information on a centralized server or database are well-known and hacks that
compromise the data of millions of users. There have been numerous high-profile
hacks of crypto exchanges throughout the years.
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Non-custodial
crypto exchanges and wallets: A non-custodial crypto wallet means that there is no
centralized gatekeeper or account where user assets are stored. Instead, in a
non-custodial crypto wallet, user funds are stored on a blockchain and the
wallet provides an interface for the user to interact with other users (or in
the case of Abra, the non-custodial wallet architecture allows users to control
their assets without the need for an intermediary, while also maintaining the
ability to leverage bitcoin’s multi-signature smart contracts and gain exposure
to a number of different kinds of investment opportunities.
Non-custodial wallets
offer greater freedom in the sense that the user maintains control of the
assets (or more specifically, they maintain control of the private keys, which
are needed to access the Bitcoin blockchain).
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Offline
cold storage: Offline cold storage
bitcoin wallets can come in a few formats, but the idea is to put some kind of
gap between your digital assets or cryptocurrencies and an internet connection.
Most offline cold storage tactics and technologies are designed for long-term
and secure storage of bitcoin, crypto, or digital assets. One thing to consider
when deciding between bitcoin storage options is how frequently you plan to
need access to your bitcoin or crypto assets and how long you plan on holding
those crypto assets.
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Hardware
wallets: A bitcoin
hardware wallet is a specially designed, encrypted device which connects to a
computer and is capable of storing bitcoin private keys. These devices act
almost like specialty USB drives, but they are designed to safely secure
bitcoin and provide an added layer of protection between the bitcoin wallet and
the user’s internet-connected device. In some senses, a hardware wallet is a
kind of like a half-step between a web-based wallet and a complete off-line
cold storage solution. The great thing about hardware wallets is that they
allow users to have some piece of mind because of the added layer of security,
but the assets stored on the hardware wallets are still accessible for use and
can be sent directly from the wallet to other bitcoin addresses or services.
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Paper
wallets: A bitcoin paper wallet
is among the most secure kind of wallets in existence. To store bitcoin in a
paper wallet, users create a public wallet key and a private key and then print
them out on paper. This is one recommended method for long term bitcoin
storage. Some people go to extra lengths and print the wallets on archival
paper using high-quality ink. It’s important that the paper wallets are
securely stored (you can even make backup copies and store them in different
locations). While the upside of a paper wallet is that they make a good
long-term storage solution, they are not that convenient for everyday use and
they require the added step of making sure the paper where the address is
stored is adequately secured and protected.