Bitcoin Wallets for Beginners

New to Bitcoin? Learn the basics of Bitcoin wallets for beginners. Discover types of wallets, setup and security guidelines, in our comprehensive guide.

Understanding Bitcoin wallets is essential for anyone who’s starting a journey in cryptocurrency. However, this topic can be a bit overwhelming due to its intricacies. When using Bitcoin, users must feel comfortable transferring and receiving it. Besides, making the best decisions will help you avoid common beginners' mistakes.

In this article, we’ll break down all the complexities of Bitcoin wallets into simple and easy-to-understand concepts. Whether you’re looking to purchase crypto for investments or daily usage, you’ll find all the essential information here. Let’s begin.

What is Bitcoin?
The importance of a Bitcoin wallet
Types of Bitcoin wallets
Setting up your Bitcoin wallet
Storing Bitcoin safely
Receiving and sending Bitcoin
Checking your Bitcoin balance
Security tips
Conclusion
Frequently Asked Questions

What is Bitcoin?

Bitcoin is a digital currency created by Satoshi Nakamoto. But it's not just a digital currency; it's a revolution in the way we think about money. It's like having a pocket-sized bank in your smartphone with low transaction fees and global acceptance, while you’re in charge of your own money.

Then, how do we use Bitcoin?

There are a few ways, you can use it for:

Personal savings: To protect your wealth from inflation and economic instability
Invoicing: If you're a freelancer or want to earn some extra income, you can get paid in Bitcoin. Many companies and platforms offer it as a payment option, giving you more financial freedom
Donations: Supporting your favorite causes with ease and transparency, such as aid to war-ridden areas or NGOs.
Investment: You can use it as a long-term investment. You can invest in Bitcoin and watch your holdings grow over time
Online shopping: is like using your credit card, but without the need for a bank or middlemen. It's a win-win for buyers and sellers. Many merchants are now using Bitcoin as a form of payment for goods and services, and buyers can take advantage of this.
Everyday transactions: It's quick, borderless, safe, and global. If you have family abroad, you can use Bitcoin for cross-border money transfers. If you're traveling, you don't have to exchange your money or carry a physical wallet. It’s much easier and safer to use Bitcoin.

The importance of a Bitcoin wallet

Creates and stores your private and public keys: Digital currencies are not stored in a physical place, so all cryptocurrencies and their transactions exist on a network of computers, using blockchain technology. Your Bitcoin wallet interacts with the blockchain by creating and storing your public and private keys, monitoring your Bitcoin balances, and allowing you to send, store, and receive digital assets.
Secures your digital funds: Your Bitcoin wallet is the gateway to your digital assets, providing you with full control and ownership over your funds. For that reason, you’re responsible for securing it and selecting a trustworthy wallet that offers safety features such as two-factor authentication methods and encryption.
Makes transactions easier: Bitcoin wallets simplify the process of sending and receiving crypto. You can easily make transactions with just a few clicks and pay for goods and services, get paid, or send money abroad.
Supports decentralization: Using crypto wallets contributes to its decentralized nature. Bitcoin is a peer-to-peer network and doesn’t require middlemen like banks or institutions to work. By storing and transacting it through a wallet, you become part of this decentralized network that empowers individuals, and businesses and promotes financial freedom.

Types of Bitcoin wallets

Source: 101 Blockchains

There are many types of wallets to choose from, and each has its pros and cons, depending on your goals, needs, and preferences. Let's start by categorizing it into two groups: hot and cold wallets.

Hot wallets

A hot wallet is a crypto wallet that is connected to the internet. These wallets create and store Bitcoin and private keys online, making them usually more convenient, since they allow you to send and receive Bitcoin quickly.

Hot wallets can be desktop, mobile or web apps, and these wallets operate on your computer and cellphone. However, since they are online, they are also more vulnerable to hacks. Take a look at the examples:

Desktop wallets

A desktop wallet is a digital platform that allows you to store, send, and receive funds through downloadable software on the computer. They are easy to use and can be accessed from anywhere in the world, while usually free to set up.

However, these wallets are more easily compromised, as scammers may be able to access it in case the server gets hacked, or even because you’re not able to add more security measures.

Some top options include:

Mobile wallets

Mobile wallets are online wallets that store private keys and assets on your smartphone. They offer a high degree of convenience as well since you’re able to access and make transactions with no bother and on the go.

Since they’re online wallets, these software are normally less secure than cold wallets, as they are often targeted by hackers. Also, if you lose your phone, you could lose access to your money – unless you have the private keys handy, which could help you regain access to it.

Top mobile wallets include

Web wallets

Web wallets are online platforms accessible through browsers and apps, allowing users to manage their Bitcoin from any device with internet access. They are more convenient, but also more risky due to their online nature.

When choosing a web wallet, users must look for reputable options with strong security measures, such as Blockchain, which is a popular crypto wallet known for its user-friendly interface and secure features.

Cold wallets

Cold wallets, on the other hand, are not connected to the internet. Therefore, they are designed to safely create and store your private keys offline and often come in the form of hardware or paper wallets. When you're managing your funds in a hardware wallet, you go through more security steps, making your money less vulnerable. Here are examples of cold wallets:

Hardware wallets

Hardware wallets look like USB drives and can be plugged into a computer to access your coins. Their main advantage is their security: they are offline and, therefore, less likely to be hacked.

A hardware wallet is also quite easy to use, as all you need to do is plug in the device and enter your PIN. By using this type of wallet, you only lose your coins if you lose the private key or master seed phrase, which is a recovery phrase used for backing up your crypto wallet.

A downside is that hardware wallets can be expensive, costing around $100 or more, and they may not be compatible with all cryptocurrencies, in case you want to explore others in the future.

If you want to get a hardware wallet, Trezor and Ledger are safe choices.

Paper wallets

Finally, paper wallets look like physical bills and can be stored in a safe deposit box, for example. Paper wallets are a simple and affordable type of cryptocurrency wallets since they’re free to use.

Paper wallets are great for long-term storage as well, but it’s easier to lose and the paper could get damaged, which means your money could be lost forever. Besides, if someone found your paper wallet, they could have access to your funds.

That’s why paper wallets are not ideal for everyday use. Instead, as mentioned above, it’s recommended to have it for long-term use and to keep it in a safe location. Moreover, make copies of it, in case you lose any.

In case you want to create a paper wallet, all you need to do is use a paper wallet generator, also known as a wallet key generator. Generate your key, print it on a piece of paper with the QR code, and you’re done!

Setting up your Bitcoin wallet

Since we’ve already discussed all the types of Bitcoin wallets, you must be wondering which one is best for you. How do you choose it? How do you set it up? How do you keep it safe? Let’s take a look below.

Choosing the right wallet

First, the best crypto wallet depends on your needs. What's your purpose? Are you looking for everyday transactions? A long-term investment? Security or convenience?

Cold wallets, as mentioned, are the most secure, but your funds won't be instantly accessible when needed. On the flip side, hot wallets are a better choice for everyday transactions and short-term funds.

So do your research, and consider these tips to make sure your funds are safe. There are different types of crypto wallets that you can choose from. You won’t be out of options.

Creating your wallet

Now, let's say you decided to create a desktop wallet, as it would be useful for your daily purchases and transactions while keeping your funds safe. Here's how you can set it up on a trustworthy platform such as Electrum:

First, download Electrum for your operating system.

Open the app and create a new wallet by adding a name to it and following the next steps.

Choose the type of wallet that suits you best. You might want to select the 2FA option for additional security. A multi-signature wallet is a good option as well since it requires multiple keys to open it.

Create a new seed phrase and keep it in a safe place, such as a piece of paper.

Select the “Go online” option to complete your wallet creation, then accept the terms and conditions.

Depending on the type of wallet you choose, it’ll ask you to authenticate using an authenticator app or confirm your keys.

Create a wallet password and click on “Finish”.

After that, you'll be ready to buy, deposit, or trade your Bitcoin.

Voilà, you have your Bitcoin wallet! Now, if you want someone to pay you in Bitcoin, for example, you can simply set up a payment link and send it to them. Learn how to do it here.

Securing your private keys

Source: Calibraint

Finally, you must keep your private keys safe. It’s important to be aware of the principle “not your keys, not your crypto”, and never share them with anyone. There are a few options to secure them, from hardware wallets to password managers and ways to store private keys.

If you’re using cold storage wallets, your private keys will be held completely offline, disconnected from the internet, as you already know. You can either choose a Bitcoin hardware wallet, keeping your keys off the grid, or a paper wallet, which would print your private keys on a physical piece of paper. For hardware wallets, examples include Ledger and Trezor, which are devices that are less likely to go through online attacks and malware, offering a robust layer of security.

When a cold wallet is connected to the computer, the benefit is that if the computer has malware it will not affect the device. Also, the keys are never displayed on the computer screen only the device so a hacked computer cannot access it.

In case you’ve created a hot wallet, secure storage options for passwords and private keys are also available through password managers. Choose a password storage tool that is both reliable and highly secure, such as Bitwarden and ProtonPass, and you’ll be fine.

Lastly, another simple method is to divide your private key into multiple parts and distribute them in different safe places. Just be careful to not lose them all!

Storing Bitcoin safely

Speaking of security, as you’re in charge of your own money, you need to make sure your Bitcoin is safe in as many ways as possible. Keeping your private keys to yourself is the golden rule, but there are other security measures you can apply.

Passwords and passphrases

When setting up your Bitcoin wallet, ensure you use a strong and unique password or passphrase. Avoid using easily guessable passwords and consider using a combination of letters, numbers, and special characters. Passphrases, which are longer phrases made up of multiple words, can provide even greater security.

Backup and recovery

Backing up your wallet is crucial to ensure you can regain access to your funds in case of device loss or failure. Most wallets provide a recovery seed—a series of words that act as a backup. Store this seed in a safe and secure location, always offline, and back up your backup.

Two-factor authentication (2FA)

Enabling a two-factor authentication method adds an extra layer of security to your Bitcoin wallet. With 2FA enabled, even if someone knows your password, they would still need access to a second factor, typically a code sent to your mobile device/email address or generated by an authenticator app. This significantly reduces the risk of unauthorized access to your funds.

Receiving and sending Bitcoin

When it comes to transacting Bitcoin, you can use it in multiple situations, such as investments, daily purchases, and salary expenses. You can accept it in your online store or even use it to pay for goods and services.

If you are the one receiving Bitcoin, you can create an invoice and send it to the one who’s paying you; if you’re sending it, you can simply transfer it through your crypto wallet.

Also, it’s quite easy to send and receive BTC using WhatsApp and Telegram bots, as these platforms are usually the easiest way of contacting someone, a business, or a customer, rather than email or phone. It’s still safe and transparent, and you can save on a ton of fees by using Bitcoin as a form of payment.

Explore all the versatile ways you can use Bitcoin:

https://www.youtube.com/watch?v=ffa4_k455VI&t=70s

Checking your Bitcoin balance

Now that you know how to send and receive Bitcoin using your crypto wallet, you must understand how you can check your Bitcoin balance. In this crypto world, knowing your balance is much more than just tracking your holdings: you can also monitor any incoming or outgoing transactions, even from other addresses.

Let's explore some methods for checking your Bitcoin balance and transfers.

Using wallet apps

A wallet app is one of the most convenient ways to check your Bitcoin account. These apps provide a user-friendly interface that displays your balance and transaction history. Simply log in to your wallet app, and you'll have instant access to your Bitcoin holdings.

Whether you’re using a hot wallet or a cold wallet, you’re able to access your funds through a wallet app.

Exploring blockchain explorers

Blockchain explorers are online tools that allow you to view transaction details on the blockchain. By entering your Bitcoin address into a blockchain explorer, you can see all transactions associated with that address, including current and past balances.

Blockonomics’ Wallet Watcher is a handy tool to keep an eye on your Bitcoin balance, no matter which wallet you choose. It helps you monitor multiple Bitcoin addresses across different wallets: you can track your balances, and transactions, and even receive email notifications when transactions occur. Save this for later – it’ll be quite useful.

Security tips

Last, but not least, ensuring the security of your Bitcoin holdings is paramount in protecting your Bitcoin from theft or unauthorized access. By following some essential security tips, you can minimize the risk of security breaches and safeguard your Bitcoin investments.

Avoiding phishing scams

Phishing scams are a common tactic used by cybercriminals to trick individuals into revealing their sensitive information, such as private keys or login credentials.

To avoid falling victim to phishing scams, be cautious of unsolicited emails, messages, or websites that request your Bitcoin-related information. Always verify the authenticity of the sender or website before providing any personal or financial details.

Keeping your software up to date

Keeping your Bitcoin wallet software up to date is crucial for maintaining optimal security. Software updates often include patches for known vulnerabilities and security enhancements that help protect against potential threats.

Regularly check for updates to your wallet software and promptly install any available patches or upgrades to ensure your wallet remains secure.

Using a VPN

Source: Xorlogics

Using a virtual private network (VPN) adds an extra layer of security when accessing your Bitcoin wallet or conducting transactions online. A VPN encrypts your internet connection, making it more difficult for hackers or eavesdroppers to intercept your data.

By using a VPN, you can protect your privacy and reduce the risk of unauthorized access to your Bitcoin holdings, especially when using public Wi-Fi networks or accessing your wallet from unfamiliar locations.

Use separate wallets for daily use and savings

When storing Bitcoin for various purposes, it’s better to use different wallets. In case you’re using it for daily use, savings, and trading at the same time, e.g., it’s never advised to store it all together in the same address.

For that reason, always separate your BTC into different wallets based on their purpose. This way, even if one wallet gets compromised, the rest of your money will be safe. You can also check out the video below to give you tips on how to protect your digital assets.

How to Protect your Digital Assets: Ultimate Beginners Guide

Conclusion

Having a solid grasp of the different types of crypto wallets, setup procedures, and security measures is key to ensuring a smooth and secure experience when using Bitcoin. It is also a first step into conquering your financial freedom, as you’re in charge of your own money.

By familiarizing yourself with this new world of possibilities, you’re able to choose the option that best suits your needs and preferences. Whether you opt for the accessibility of hot wallets or the enhanced security of cold wallets, selecting a reliable wallet is key when safeguarding your digital assets.

As you continue to navigate the complexities of Bitcoin, make sure you stay informed by trustable sources and be cautious when transacting your crypto. With the right knowledge and precautions in place, you can harness the full potential of Bitcoin and continue your journey of being your bank.

Frequently Asked Questions

Do I need a Bitcoin wallet to own Bitcoin?

Yes, you must have a Bitcoin wallet to own and manage your Bitcoin. It is a digital wallet for securely storing, sending, and receiving your Bitcoin. You can find the best options available today here.

How do I choose the right Bitcoin wallet?

Choose a Bitcoin wallet based on your needs. Consider factors like security features, ease of use, device compatibility, and whether you prefer a hot or cold wallet.

How do I secure my private keys?

You must keep them confidential and never share them with anyone. You can also use hardware wallets for added security, enable two-factor authentication, and regularly back up your wallet's recovery phrase in a safe and offline location.

How can I check my Bitcoin balance?

You’re able to check your Bitcoin balance through your wallet. Most wallets provide an overview of your balance, and you can also use blockchain explorers by entering your wallet address to view your transaction history and current balance.

Can I start my Bitcoin journey with a small amount of Bitcoin?

Yes, you can. Bitcoin is divisible, and you can purchase a fraction of a Bitcoin. This allows you to be flexible, and as you become more comfortable, you can increase your holdings.

Are Bitcoin wallets compatible with other cryptocurrencies?

Depends on the wallet. Some wallets are designed exclusively for Bitcoin, while others support a variety of cryptocurrencies. Choose a wallet that aligns with the specific cryptocurrencies you intend to manage.

Bitcoin Wallets for Beginners

Table of Contents

What is Bitcoin?

The importance of a Bitcoin wallet