Online Bitcoin Wallets (Web Wallets)

Web wallets are convenient. Probably too convenient. You manage them in a web browser - if you need to reinstall your OS you don’t have to worry about recovering of your Bitcoin, your coins are on someone else’s servers, the user interface is nice and so on.

The disadvantage of many web-based wallets is that only some will let you own your recovery seed. If you forget your passphrase all your Bitcoins are gone. If you make up a weak passphrase someone’s bot will steal your coins.

Web Wallets and Privacy

Another aspect is that your activity. Your IP address and whatnot will be monitored and possibly disclosed to authorities without any notice. It is like using Gmail (Google discloses everything to everyone who says you might be doing something illegal), only that the pool of users is smaller, so be careful.

So much for privacy. Just don’t forget that online web-based Bitcoin wallets are a trust machine. You are trusting someone enough to let your coins live on their servers.

Don’t use a web Bitcoin wallet to store a lot of them. You don’t think that any web wallet is good for cold storage, do you? There are now places where you can have a web wallet for Bitcoin cold storage but you have to register and go through AML/KYC. If that is for you, head over to CryptoFacilities. They do it the same way as you would with any other Bitcoin cold storage - Bitcoins are on offline servers, safely separated from the Internets. The only drawback is you are giving out your Bitcoin to some organization.

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The two biggest and most popular web wallets are Coinbase and blockchain.info. These also have direct integration with certain exchanges or services so as to make your transfers easier. Coinbase even has their own Bitcoin exchange with plenty traders. However, it is only convenient for people from the US.

If you sign up with this Coinbase referral link you will be rewarded $10 in BTC the moment you buy Bitcoin worth more than $100.

As for security, the most powerful wallet right now was said to be BitGo. BitGo is the provider of hot wallets for exchanges like BitStamp, BitGo also was the security solution provider for Bitfinex while it was hacked though.

Still, even with stealth security, privacy cannot be compared to software or hardware wallets for any of these web apps.

Not only is your activity logged by third party and your account can be frozen for no reason any time. There is a much bigger issue regarding privacy and that is the number of addresses in each wallet.

Generally, software wallets generate a pool of addresses that are all linked to your wallet. You can use a different address for different types of incoming payments and you will still receive money to the same wallet.

Online web-based wallets typically don’t do this. You only get one bitcoin address and that’s it.

This is great for privacy because of tools like Wallet Explorer. Wallet Explorer knows addresses of hot wallets on major exchanges and of darknet marketplaces. If you have a blockchain.info wallet and you shared your address on your forum account or blog, anyone will see where the coins went. And remember, it is all on the blockchain: Even if Wallet Explorer doesn’t know the Bitcoin address of a new darknet market today, it will know it in a few weeks time, while your transaction will still be on the blockchain - forever.

Hopefully, address pooling will be accessible from a browser app soon too. There is Samourai wallet being developed and there is Xapo. However Xapo will need your verified identity first. (Read more about wallets with address poling and coinjoin)

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Coinbase

Coinbase is something like the bank institute of Bitcoin. You don’t even get your recovery seed. Everything is taken care of.

  • If you are just starting out it might be ideal for you.
  • If you are not starting out, this might be too limiting for you.

Another thing good to know is that Coinbase will let you buy Bitcoin with your bank account (unless you are from a wrong country). There is a busy and popular exchange connected to Coinbase wallet.

As for security and privacy, Coinbase logs your activity. A sign-in attempt from an unknown user agent and IP needs to be validated via email.

Getting a Coinbase account? If you sign up with this Coinbase referral link you will be rewarded $10 in BTC the moment you buy Bitcoin worth more than $100.

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Blockchain.info

Blockchain.info is another plain and simple wallet.

You have much more freedom though (and you also get your wallet’s seeds). If you are willing to play around with settings you can achieve a pretty good privacy.

  • Sign-ins from new locations must be always validated via email. Users can even set up an IP whitelist and limit access only to these addresses.

  • There is an option to have backup of your wallet sent to your mailbox. That is something to be careful about because you need to be sure your mailbox is secured, too.

  • There is no Bitcoin exchange on Blockchain.info. It has many partners instead of that: itBit exchange, Gyft or Purse for shopping and BTCJam to borrow Bitcoin. (Also see: Lending Bitcoin)

“Purse is a marketplace that connects shoppers with unused gift cards. Shoppers pay with Bitcoins at a huge discount, and Earners liquidate gift cards.”

Something else also worth mentioning here:

Learned the hard way with blockchain.info:

Don’t use a fake email to sign-up.

Your wallet comes with a unique, complicated User ID that you won’t remember. The ID will be shown to you and it will also come to your mailbox.

Once you’re logged in the wallet you have the option to go to settings and set your alias that can be used instead of that ID. But if you choose a simple alias the system will ask you to use the original ID on a future attempt to login from a different browser.

Now, you don’t remember the ID. There is an option to have the ID sent to your email but that is indeed not possible if the email address was fake.

Still don’t want use a real email address? Even if setting up one with openmailbox.org takes like 20 seconds?

  • Bookmark the login screen with original ID.

  • Save the ID in a bit.ly.

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BitGo

BitGo is trusted by major bitcoin trade exchanges so if you are looking for a very safe and very monitored online storage, BitGo might be a way to go.

There is a web client and a browser extension.

The browser extension is in this case safer because it isn’t loading your wallet from distant server where a developer could abuse your session while you are online.

On sign up with Bitgo you are asked to set up a two-factor auth, which mitigates about 99% of hacking attempts. Each sign in is logged and the account owner gets an email immediately.

Within a single account you can then set up multiple wallets and even add new people to them. Each wallet can have a specific password, you don’t have to use the default account’s pass. You can even add other users to manage certain wallets.

So, you can probably see why Bitgo is the choice for businesses. All the functionalities are very useful if you really have to manage those funds.

The web interface is a bit cranky though, especially if you use a VPN. VPNs are sometimes slow in downloading media and scripts so the result can be your wallets not showing up at all. It is just a glitch in the interface.

There is also one unusual thing regarding the private keys. Bitgo gives you no seed as it uses keytern.al to manage the recovery. You are given a PDF document with QR codes, you need to print this one.

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Bitcoin Wallet as a Mobile App

Having a Bitcoin wallet on your mobile is quite popular. It is convenient, whenever you want to tip someone scan the bar code – done. But that’s also the only purpose a mobile wallet should have. Better not to store there all your wealth… But that is better not to be stored on a single place either way.

Bitcoin Wallets for Android

  • The most popular of the “brands”, should we say, Mycelium. With Mycelium you have 100% control over your private keys. The Android app is top, it is not a marketing thing or anything like that behind the Mycelium’s popularity.

  • Further brief look at Google Play and you will see a Bitcoin Wallet by Andreas Schildbach.

  • The “bank of Bitcoin” Coinbase has an Android app too.

Bitcoin Wallets for iPhone

  • Interesting app seems to be Breadwallet.

  • While there is a Mycelium app for iOS, it is notable worse than the Android version. There also was a bug. The iOS version is not even listed on Mycelium’s homepage yet, but the code is on GitHub. You see it is still actively developed.

Mycelium Android Bitcoin Wallet

Rightly the most popular of mobile Bitcoin wallets. The Android app is top, it is not a marketing thing or anything like that behind the Mycelium’s popularity.

Just a note to Mycelium for Android.

  • The app creates your wallet instantly.

  • It will give you no recovery seed though, you have to generate the seed by using the ”Create Backup” function.

  • Mycelium will show you 12 words one by one. You will be then asked to type them back in to confirm you know the seed.

See the image below, it is the top link in th menu.

As of late 2016 current Mycelium versions also include the Mycelium Local Trader which is equivalentof LocalBitcoins right inside your mobile wallet.

Read here how to use Mycelium Local Trader

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Bitcoin Wallet Installed on your Computer

The best Bitcoin wallets as a software

Bitcoin software wallets are free, open source and generally considered better option. With software wallet you have the full control over your money.

  • There is no website to go offline when you need to send money
  • No third party can seize your funds (yes it still happens, ChangeTip does it if you are from a country with Bitcoin restrictions!).

With software wallets the only way someone can take your Bitcoin is through your own mistakes: Getting a malware or virus on your computer or having a very weak password.

Electrum

Easiest to use: Electrum

Electrum is pretty lightweight, easy to install and intuitive to use. It is also actively maintained, there was a new version released in February 2016.

Some of the new Electrum 2.6 Features

  • First official release of the Kivy GUI, with android APK
  • New command: ‘notify <address> '
  • Alternative coin selection policy, designed to help preserve user privacy. Enable it by setting the Coin Selection preference to Privacy.
  • The install wizard has been rewritten and improved
  • Much improved support for Trezor devices…Device wipe, multiple device support etc.

Installing Electrum Bitcoin wallet

Get Electrum here. There are versions for all major OS.

As you open it for the first time the set up will walk you through the wallet creation.

  • You can change the wallet’s name, if you don’t, Electrum will use default_wallet.

  • The wallet already comes with a set (pool) of Bitcoin addresses, it’s not just a single address. You will receive coins sent to any of your “receive” addresses.

  • If you want to manage separate wallets you can always create another one in File > New/Restore.

Electrum is not the greatest Bitcoin wallet for stealth security

While Electrum is fine for everyday use, it uses centralized servers and by the way it operates it is possible to tell Bitcoin addresses of the same wallet.

It is also possible to associate an IP address with the transactions.

With the amount of Bitcoin transactions it would be hell of a job to find you, but still - relying on this is security by obscurity.

If that is not good enough for you but you still want to use Electrum, generate separate wallets (File > New/Restore) and use VPN when doing transactions.

MultiBit HD

Still very easy to use: MultiBit HD

The older version of Multibit used to be popular until rumors about its security flaws started to spread. That was the Classic version though and the problem was the way the wallet’s keys were generated.

Back then the keys were a chunk of code that one needed to export and import somewhere else to restore the wallet. With MultiBit HD (hierarchical deterministic) you get seed words that can be written on a paper. Problems recovering the wallet shouldn’t come across anymore.

Armory

More comples but more powerful: Armory

Armory is a great Bitcoin wallet for cold storage. The set up is a bit more complicated but both security and privacy is better. Unlike Electrum and MultiBit HD, Armory doesn’t disclose your IP address when you make transactions.

Installing Armory Online

There always is a setup process to take you through the wallet creation, so no need to worry even if you are not a geek.

This is how to install it in online mode (NOT for cold storage).

  • Armory is available for every major OS. Armory.

  • Download it and select online wallet to install.

  • You’ll first get your seed. A set of words that you want to write down on a paper. Your seed will let you recover your wallet if your computer should crash or get stolen.
    • Seed will also recover your wallet for anyone else who gets it. That means it shouldn’t really see the electrons again if you want to keep it safe so don’t store it in your Dropbox.
  • Next important thing the installation process will come up with is password. You will use this one to make transactions. Come up with something strong and memorable, you can try diceware passwords. And again: Paper!

  • Once you generate the wallet you will get a number of “receive” Bitcoin addresses. You may use either of them, the transaction will always end up in your wallet.

Bitcoin Wallet for Cold Storage?

If you want to have a kind of savings account on a laptop you don’t use anymore, go ahead and get Armory on it. Armory on an offline computer is the only equivalent to a hardware wallet.

It’s just that a hardware wallet is easier to use and lighter to carry around, of course.

What is Bitcoin cold storage

  • The cold storage means that your wallet with Bitcoins lives on an offline computer.

  • Then you create a watching copy on a computer that is online.

  • If you want to send money from your Armory wallet you’ll have to sign the transaction in the offline wallet and broadcast it from the watching copy.

  • With hardware wallets this process might get easier. They are carried around more easily as well. Check out Trezor, the display and buttons are there precisely because of this process.

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Hardware wallets: Why not just a pen drive?

Hardware wallets are small devices that host your Bitcoin wallet. They are meant to make it easy to have a safe cold storage but being able to send transactions out of the hardware wallet, too.

  • You initiate transaction on a computer
  • Confirmation takes place on the secure hardware wallet device

Why not just pen drive?

You could use a pen drive too. That will only get you a storage though, no added security. Hardware wallets are stealth because all the sensitive processes happen inside of the wallet’s hardware which is tamper-proof. You can use them on a computer infected with virus and malware while your Bitcoin wallet will remain safe. You should even be able to restore your wallet on an infected computer, your data still should not be compromised.

If you are serious about Bitcoin, consider one. Hardware Bitcoin wallets are the safest place to store your coins at all.

Ledger Wallet vs. Trezor Wallet

There are currently two major players:

Trezor Hardware Wallet

Trezor is a bit more expensive but it comes with a display which makes it easier to use for transactions. There is a Trezor API integrated into wallets and exchanges) to let you sign up directly with Trezor.

  • Electrum, Mycelium and MultiBit HD wallets are all compatible.

  • There is also a Chrome extension and an Android app that sniffs any transaction activity on your Trezor device.

  • Trezor also supports altcoins, you can even keep multiple currencies on a single device.

Ledger Hardware Wallet

  • Ledger Nano looks much like a naked pendrive (it comes with a package for it).

  • Ledger Unplugged is contactless and looks like a credit card. The contactless version needs last generation Android phone or contactless USB reader to make transactions but it is much easier to carry around then another “device” or stick.

  • Any flavor of Ledger Wallet can be integrated with Electrum, Mycelium and others, even though it by default runs its own interface.

  • There is no altcoin support nor ever will be, according to Ledger Wallet homepage.

As for security, the basic principle is the same for Trezor and Ledger Wallet. The only thing you have to care about is your password and recovery seed. That said, the user is indeed owner of the keys and there is no third party involved here. The wallet then takes care of all the security, meaning you can use the hardware wallet even on a computer with malware or viruses.

Out of these two bitcoin hardware wallets, Trezor has wider range of functionalities and integrations.

Ledger Wallet on the other hand has three different types, one of them contactless in the shape of a credit card.

Now the choice depends on your preferences - whether you need the integrations or the easy-to-carry edge.

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