What bitcoin wallet should I use for 2016?

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What bitcoin wallet should I use for 2016?

There seems to be a lot of conflicting suggestions online when I search for what bitcoin wallet to use. What is actually the best one to use right now?

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  • This is a very broad question and the answer mostly depends on your specific needs. First let's narrow it down to the few top contenders for the "best bitcoin wallet" and then we can talk about when each one would be viable for you. As of now the best bitcoin wallets in existence are in my opinion: Electrum, Mycelium, Trezor, BitGo and BitAddress. Now answer these questions...

    Are you a bitcoin newbie and/or just want the most convenient option?

    A web wallet is the perfect solution for beginners or people looking for the convenience of an online bank account. While web wallets are the most convenient option, it is important to note that they also might also be the least secure. Most web wallets will hold the private key for you and could theoretically spend your bitcoins without your consent. BitGo is a bit different because they use bitcoin's P2SH functionality to secure your bitcoin online with 3 separate private keys in a multi-sig wallet. One key is held securely by BitGo, one is encrypted by a user password and held by a Key Recovery Service (they can't ever figure out this key without your password), and the last key is generated when you sign up and downloaded into your browser for you to store securely (this key never touches any servers). It takes two of the three keys to spend the funds making it impossible (given that you have a strong password) for BitGo to spend it without your consent. This all sounds very complicated but it is implemented so seamlessly that it will seem like any other web wallet. For this reason along with it's ease of use, BitGo is the best option for a web wallet.

    Are you storing a small amount of bitcoin, and want to have complete control of your funds?

    In this case, an open source software wallet would best suit your needs. Be aware that software wallets store the private key on your computer and are susceptible to hackers. Although most software wallets have built in security measures, there is still always a risk.

    If you're using a Desktop OS such as Windows, OS X or Linux then you should use Electrum.

    If you're using a mobile phone or tablet, then you should use Mycelium for either Android or iOS. If you have trouble compiling Mycelium for iOS, then you might want to look for an alternative such as Breadwallet.

    Both Electrum and Mycelium will generate backups or "seeds" when you first start them up. Seeds are usually 12-24 random words. It's important to store these seeds on a physical piece of paper in a secure location because if you ever lose your device or your system fails, then you can restore your funds with the seed on a new device.

    Are you storing a large amount of bitcoin and need to have top notch security?

    You have two options here. If you just want to buy some bitcoin and store it securely for a few years then you should use BitAddress. BitAddress allows you to generate a "cold storage" private key which means that the private key will never be connected to a computer that is online. Simply download the html file from the official github repo and open it on a computer that will never be connected to the internet. You can generate a wallet in a minute and either print it out in the form of a paper wallet or transfer it to a USB stick for safekeeping. The paper wallet will have a public key and a private key visible on it along with a QR code for each. You can send bitcoin to the public key and spend or "redeem" it with the private key. For this reason it's important to never let anyone see the private key. If you want added security you can use BIP38 to encrypt the private key with a password under "Wallet Details".

    The second option is to invest in a "hardware wallet". This makes things much easier than generating your own cold storage paper wallet and you will always be able to easily spend your bitcoin. Basically, you have all the security of a paper wallet with all the convenience of a software wallet. The best hardware wallet right now is the Trezor. It takes a few minutes to setup and generate a seed (similar functionality to the software wallets mentioned earlier) and after that you can plug it into any computer (even a computer infected with malware) via USB and safely spend your bitcoin. You Trezor is protected with a PIN code so only you'll be able to use it and if you lose it then you can order a new one and restore your funds with the backup.

    Wallets you don't want to use...

    The bitcoin network is partially secured by nodes such as Bitcoin Core and Bitcoin Classic which come bundled with a simple wallet. You do NOT want to use this wallet to store your bitcoin. In my opinion, it shouldn't even be included in the software anymore. The most secure and private wallets today are Hierarchical Deterministic and the node wallets aren't. Don't use any wallet that isn't Hierarchical Deterministic.

    Lastly, don't use any wallet that has no reputation. It's very easy for a developer to implement backdoor access into a wallet and steal your funds so be sure that whatever wallet you're using has been reviewed by other developers and has established a good reputation. If you're considering using a new wallet, research it first!

  • MonkeynoMonkeyno Posts: 3

    @TheGuideGuy Wow thanks for all that info! I'm going to go with Electrum for now because I want a local wallet on my computer.

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