Bitcoin’s popularity and surge in value caught the attention of many newcomers to the cryptocurrency market in the last few years. While using Bitcoin is simple enough, finding the right wallet for your needs can be somewhat complicated for beginners. That’s why we will explain how to create a Bitcoin wallet using different software and hardware solutions.
What is a Bitcoin Wallet
To get a Bitcoin wallet, you simply need to download an application online or buy a hardware solution from hardware wallet manufacturers. The software that lets you access your Bitcoin funds is called a Bitcoin wallet. Through encryption, it gives you secure access to the funds located on your Bitcoin address. This address effectively serves as a bank account for all of your Bitcoin.
Each Bitcoin address, besides having funds allocated to it, also has a unique private key attached. This key is a string of letters and numbers generated at the same time that your Bitcoin address is created.
The software requires your transaction to be authorized with the private key to open a Bitcoin wallet and send funds to another address. That’s why it’s essential to keep this key secret and safe.
Since the private key is a 256-bit string of characters, it’s derived from the seed phrase. This phrase is 12 to 24 words long and is made up of a list of 2,048 terms. The seed phrase should be kept secret, as it serves the same purpose as the private key. If you lose access to your Bitcoin wallet, you can regain access to your funds by importing the phrase into any other Bitcoin wallet.
Types of Bitcoin Wallets
Before you create a Bitcoin wallet, you first need to ask yourself what you plan to use the Bitcoin (BTC) for. Are you looking for something to use for everyday expenses? Are you interested in long-term savings? Perhaps you are looking to trade cryptocurrencies actively or start betting with Bitcoin? Having a clear idea of what you want to use BTC for will determine what type of wallet will suit you best.
Different Ways of Storing Bitcoin
Depending on how the wallet interacts with Bitcoin’s blockchain, the wallets are categorized as either cold or hot storage.
Hot wallets are those that are constantly online or installed on devices that are connected to the internet. While these software solutions have implemented features that isolate your private key (usually stored in the wallet.dat file), there is still a risk when holding Bitcoins like this. Exposure to viruses, keyloggers, malicious software, and hacking attempts make these wallets a less secure method of storing large amounts of Bitcoin in the long term.
Cold storage wallets are most often hardware and paper wallets. Since these are commonly hardware USB devices, they are connected to the internet only when signing a transaction with your private key. Simply having the private key or a seed phrase backed up somewhere without access to the internet or other parties is considered cold storage.
Software Bitcoin Wallet
A software wallet is an application that you can download for free on your desktop or mobile device. Whether it was designed for a mobile platform like iOS or Android or desktop and laptop computers will further differentiate how you interact with the Bitcoin blockchain. Don’t worry, though; we will explain how to set up a Bitcoin wallet, no matter what device you are using.
Before adding any amount of Bitcoin to your wallet, you will need to buy it from an online cryptocurrency exchange.
These exchanges require you to create an account and, most often, to go through a KYC (know your customer) procedure. You will need to provide an image of your passport, personal ID, or driver’s license.
Besides a Bitcoin wallet account, these cryptocurrency exchanges have other cryptos available. Most of them are paired directly with Bitcoin, so if you are looking to trade and invest in other cryptocurrencies, it’s easiest to do so with BTC.
Cryptocurrency exchanges have both web and mobile applications, making them convenient for trading and paying on the go. However, there is an important difference between these wallets and other software solutions. When you make a Bitcoin wallet on a cryptocurrency exchange, you don’t get access to private keys. This means that you are not in complete control over your funds. We advise you not to hold your funds on crypto exchanges, as they are often targets of cyberattacks. Poor management can also spell their doom, which won’t bode well for the funds stored there. The popular exchanges of today likely won’t end up like Mt. Gox, but why take the risk?
If you are interested in knowing how to get a Bitcoin wallet on your desktop or laptop computer, we’ve got you covered. It’s the same as for any other program or app, really. After a simple installation process, your software will generate a new address and a seed phrase that you should store somewhere safe. You can freely use the application after backing up the 12, 18, or 24-word phrase.
Desktop wallets can also serve as Bitcoin nodes, storing the complete blockchain and, therefore, a record of all previous transactions. If you set up a Bitcoin wallet that also serves as a node, you will not only increase the security of your own transactions but the overall Bitcoin network, too. Furthermore, running a full node will always give access to the latest transaction information on the entire network.
If you want to have a bit of spending money while saving the bulk of your Bitcoin for a rainy day, a mobile Bitcoin wallet application for iOS or Android systems could be just the ticket. As with desktop wallets, all you need to do is download a dedicated app from Google Play or Apple’s App Store.
When booting up a Bitcoin wallet app for the first time, you’ll likely be required to backup the seed phrase in some way before accessing the program. This is an excellent precaution and a perfect opportunity for new users to learn about account security.
Mobile wallets usually have a straightforward and user-friendly interface. All it takes to send or receive BTC is pasting a Bitcoin wallet address or just using a QR code.
Most vulnerabilities with software wallets are bypassed by using their hardware alternatives, and these are the go-to solutions for storing large amounts of Bitcoin long term.
Hardware wallets look like flash drives and can store many other cryptocurrencies besides Bitcoin. Knowing how to set up Bitcoin cold storage with a hardware wallet is essential for keeping your funds safe from cyber attacks, malware, crypto scams, and phishing sites.
While your private key is associated with your public Bitcoin address, a hardware wallet keeps it safely stored and isolated from the internet, minimizing the risk of it being compromised. Hardware wallets also implement additional layers of security such as passwords or PINs.
The private key is stored in an isolated microcontroller, and it can’t be extracted from the device as standard text. With a hardware solution, you don’t need to worry about how to make a Bitcoin wallet safe from viruses. A hardware wallet is not susceptible to computer viruses like its software counterparts. While you can use it to sign BTC transactions, the private key located within the device isn’t exposed to malicious software, even if you use it on a compromised computer.
When you create a Bitcoin account, you generate your public address, a private key, and a seed phrase that helps you recover your account or create new BTC wallets. A written version of this information is considered a paper wallet. A printed-out QR code or key is regarded as an outdated method of storing Bitcoin information these days. However, it is still commonly used and is a popular option with old-fashioned people who don’t trust technology enough yet.
Bitcoin is an evolving project that involves its community in agreeing on how it should grow and evolve. To open a Bitcoin wallet, you have to do some research and see if the app you plan to use supports some of the advanced features of the network.
SegWit and Legacy Addresses
Bitcoin has undergone some improvements to its network, and as a result, there are several types of public addresses that the app needs to support. The SegWit upgrade has introduced a different kind of BTC address, and having a wallet that supports it besides legacy addresses is necessary in order to be able to receive Bitcoin from anyone.
Simplified Payment Verification (SPV) is what allows Bitcoin wallet applications to run without having to have a full node.
Knowing how to create a Bitcoin account is great, but finding the one that allows instant payments is even better. The Lightning Network is an additional layer on top of Bitcoin that acts as a payment protocol. This enables users to make instant payments at no extra cost.
Before you create a Bitcoin account and generate your first public address, make sure that the code used in creating the application is open-source and trustworthy. Peer-reviewed applications can be trusted by Bitcoin owners and used without worrying that the application has a backdoor to tamper with your funds.
Bitcoin transactions are available for anyone to see on the public distributed ledger. Therefore, some features are necessary for wallets to implement and improve the privacy of their transactions. Some applications support Tor (The Onion Router) to prevent anyone from associating your IP with your public BTC address.
The best Bitcoin wallet options will let you adjust your transaction fee. Apps that support Replace-By-Fee (RBF) and Child Pays For Parent (CPFP) features will never leave your transactions stuck and will let you change the fee if you need to speed up the transaction.
Safely Storing Your Bitcoin
We can’t stress enough the importance of security when it comes to Bitcoin. Here are some of the steps you can take to improve the security of your BTC wallet and the funds within it.
Write down your backup seed phrase. Make sure that you keep the backup somewhere safe. Storing it on your personal computer, mobile phone, or in the cloud isn’t safe.
A Bitcoin wallet login will most often require you to enter a PIN or a password. Make sure to use a safe and unique password.
If a wallet offers you to use 2FA (two-factor authentication), always use the option. The feature requires you to enter another code besides your password when logging in. A popular authentication application is Google Authenticator, which generates a new number sequence every few seconds, providing an extra layer of security.
What is the best and safest Bitcoin wallet?
Before going for the Bitcoin wallet download link, research what wallet app is good for you. Mobile wallets with open-source code are subject to peer review and are the most secure applications for Bitcoin users.
Hardware wallets are the safest ways to store Bitcoin since they are not susceptible to malware and they are not constantly online and exposed to attacks from malicious hackers. This kind of crypto wallet can hold other cryptocurrencies and not just Bitcoin.
Mobile wallets are best for day-to-day use, and they can import extra levels of security like passwords, PINs, and 2FA to bolster security further. Your coins are a click away, and with QR codes, payments are straightforward and lightning-quick.
Does it cost money to open a Bitcoin wallet?
You don’t need money to make a Bitcoin account. However, to get some Bitcoin, you’ll most likely have to buy it on a cryptocurrency exchange and transfer it to your Bitcoin address.
How do I create a Bitcoin wallet?
Anyone wondering how to create a Bitcoin wallet will be surprised to find that it’s no more complicated than downloading the appropriate application on your computer or mobile device. However, properly securing your private keys takes a bit of thought and consideration on the user’s part. You can use the seed phrase for your Bitcoin address to recover your wallet if you lose your smartphone or your laptop malfunctions, but always be sure to keep your private encryption safe regardless.