Before You Begin
Lesson 5: Soft Wallet Primer
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Welcome back to Digital Currency Ownership: Before You Begin. This is lesson five, our soft wallet primer. The purpose of this lesson is to introduce you to the wide variety of soft wallets that are currently in the market and hopefully give you some criteria and methodology for selecting one that matches best your needs.
Before we get started let’s start with some basic terminology. There are two types of wallets, there are heavy wallets and light wallets. Heavy Wallets download the entire Bitcoin blockchain examples of that would be the Armory or the Bitcoin Core. Light Wallets in contrast they download only a summary of the blockchain or none at all and there are quite a few light wallets. In fact, the mobile wallets are light wallets and a lot of the desk top wallets are too.
Now we specify these are Bitcoin wallets because Bitcoin again relies on this blockchain methodology. But the vast majority of wallets to be frank are Bitcoin wallets, there are very few that are multi-currency wallets. So we’re going to be looking primarily at Bitcoin wallets in this lesson, though we will touch upon a couple that do handle common currencies like Litecoin or Darkcoin.
The thing about Heavy Wallets is that the blockchain that it downloads is extremely large. It downloads the entire blockchain when you install it and then it constantly updates as new transactions are added to the blockchain, of course that’s continually happening. For a lot of people that the original 22GB download is going to take a day or more [ed- actually it will take weeks] the first time they set up this wallet and then it’s going to constantly update, constantly update, so it’s going to take up computing power, bandwidth and storage on your device. As you can see from September 2013 to August 2014 the blockchain has more than doubled in size and that’s not going to stop. We’re looking at a fairly steady pace of growth. 22GB again in August 2014.
Now this next chart is a bit daunting so we’re going to weed it down really quickly. Let’s get it up on the screen for starters. Okay, the column on the left shows us the name of fourteen of the most commonly used digital wallets. In this case, Bitcoin wallets but a couple again do handle more than one currency.
The next columns tells us whether it’s web based, whether it’s a desktop system, whether it’s available on mobile, whether it supports other currencies, whether it supports offline transactions, the privacy rating for this wallet and whether it’s multi-lingual.
Now, there’s a lot of data here and I’m just going to move on because you can come back or you can pause the video here if you want to look at this in depth. We are going to narrow this down for you so let’s go ahead and take on the next slide. For a lot of people there’s going be a few things that qualify very quickly that range of wallets and limit that range.
For example, do you require your wallet to handle more than just Bitcoin? If you do, there’s only two choices on that list, Coinkite and Hive. Do you require a multilingual wallet? In that case there’s only three options Bitcoin Core, Green Address and Multibit, and Green Address currently doesn’t have a multi-lingual version but they promised that one is coming very shortly and it is under development as we speak.
Next, do you require the best security possible? Are you a security freak? If you are, there’s only two good choices for you Armory and Bitcoin Core.
Finally do you want a wallet that will facilitate multi-tier management? What I’m talking about here is the management strategy that we advocate to you which is dividing your holdings into different pools, short-term pool, medium-term and long-term pool. If you do want multi-tier management for handling your Bitcoin holdings then your options are Blockchain.Info, Green Address and Hive. Now if we look at this list of possible choices we’ve narrowed down that list of fourteen to a list of seven potential winners.
So this means we have a possible short list now that looks like this. This is a little more manageable.
Our possible short list includes Armory, Bitcoin Core, Blockchain.Info, Coinkite, Green Address, Hive and Multibit. Now I know this leaves off a couple of popular names Coinbase and Mycelium, in particular, we’ll get into that later on. Right now we are going to look at this set of seven because frankly this is a really solid set of seven and it’s going to address most people’s needs. Again I’m going to move on you can come back to this chart or you can pause it if you want but what we’re going to do now is we’re actually going to look at each of these seven in a little more details.
So here we go, let’s look at Armory. Armory can be found in BitcoinArmory.Com, down here on bottom left we have a screenshot of the Armory Wallet in action. This is one of the most feature rich and secure wallet systems that are available today. It offers three different user modes, they all have good interfaces and there’s a simple mode, there’s an advanced mode and there’s a developer mode. So really for most people there’s two modes simple and advanced. It also includes a graphical keyboard to help protect against keyloggers which is a very nice touch, again it’s extremely security conscious, it’s a very well done piece of work. It also offers extensive cold storage options including fragment and cold storage. It does support deterministic wallets. Now, deterministic wallets mean that a different number, a different key is issued each time a transaction occurs and it keeps somebody from, if they actually do get their hands on one of the keys from cracking other transactions using the same key, again extremely good security. It is desktop only and it runs on top of the Bitcoin Core. We’ll talk about Bitcoin Core in just a sec. What this means is this is a heavy wallet and of course it is desktop only. It’s going to take up a large amount of space on your machine but this is a great tool, it’s a solid tool. If you’re one of the security freaks that wants to have a machine that’s dedicated to handling your Bitcoin holdings, Armory is the system for you.
Next the Bitcoin Core. Now, this was the original Bitcoin wallet developed by Satoshi Nakamoto. It’s continually update by the core Bitcoin development team. It’s extremely simplistic, it lacks a number of advanced features found in other wallets but since it’s the most scrutinize wallet in use, it’s also probably the most trustworthy choice and though it has a very minimal features set now since it’s only under development it is going to improve. It is desktop only and again it is a heavy wallet. Now realize what Armory has done, they’ve taken the Bitcoin Core and they’ve put a nicer, more feature rich on top of the Bitcoin Core. So frankly if I was tempted by Bitcoin Core, I would probably install Armory instead because I’m going to get the benefits of Bitcoin Core plus a much nicer interface and much better usability.
Next Blockchain.Info, this is also a really solid choice and technically, the name is My Wallet. Everyone calls it Blockchain.Info just because My Wallet doesn’t really describe what it is or distinguish it from other wallets very well. This is a nice, secure wallet as well, it’s not as secure as Armory and the Bitcoin Core but it does offer two factor authentication. There are no fees for this wallet. It does provide SMS and email payment notifications, which is really nice. There are very easy backups built into this. It has a nice, simple, easy to use interface shown on the screenshot on the page here. And it does facilitate the multi-tier management strategy, has a lot of things going for it, I know a number of people that use Blockchain.Info and really like it. It’s sort of the nice middle ground, compromise, you don’t want to be locked in a heavy wallet, you don’t want to be locked into a heavy wallet, you want the option of having a mobile device interface etc. Blockchain.Info is a very good choice in that regard.
Next Coinkite. Coinkite is a slick, commercial product. It’s web-based but it has a debit card option so it does give you a way to spend your Bitcoin when you’re outside the house but using the debit coin card. It doesn’t give you full transaction capabilities, you can’t buy Bitcoin, add Bitcoin etc. but you can spend it. It also supports Bitcoin, Litecoin and Darkcoin, it’s one of our multi-currency wallets. It’s developer friendly, it has an API option, so hopefully this means that other people are going to be building in the Coinkite system and it’s going to expand in the future. They offer a point of sale solution, which makes them extremely attractive to some people because here we have now a solution that a merchant can implement and they can also wind up with something that will give them a debit card for spending those coins. They have very good interfaces, like I say it’s a very slick product, you see a small screenshot at the bottom right. It is however the most expensive solution listed here. There are monthly fees particularly in using the debit card.
Another option is Green Address. Green Address is a relatively new comer here, but the security is quite good on this. They do provide deterministic wallets. They do offer two factor authentication. They do facilitate multi-tier management and they are providing the multi-lingual interface very soon. And they also provide easy transfers among other Green Address users, so if you’re on Green Address, I’m on Green Address, we can actually transact on Twitter, we can transact on Facebook, I believe we can also transact by SMS. It’s quite an interesting new product. I haven’t spent a whole lot of time on it yet, but I am telling you I am downloading it and trying it.
Hive, this is actually the system that I use. It supports Bitcoin and Litecoin, which does give it an advantage over many of the other systems. It does facilitate multi-tier management, which is another good reason to have it. It’s extremely easy to use. It’s also extremely easy to transact with other Hive users. Just from a sheer simplicity point of view, Hive is a real winner, it is reasonably secure and it has a lot of the features that you are looking for. It just makes it very, very easy to transact with Bitcoin both with merchants and with other users.
Multibit. Multibit’s on this list primarily because of its multi-lingual capabilities. It’s very lightweight. It’s very fast. It’s translated into more than 35 languages. You can run multiple wallets which does give you a way to handle your multi-tier strategy. It also connects directly to the Bitcoin network and it downloads a small portion of the blockchain, not the entire thing so it’s actually a light wallet. The problem here, as you can see from the interface is, it’s very minimalistic. It looks really old school in that sense. And it is because it is quite light weight and it is very fast. If you are somebody who’s comfortable with Linux type interfaces and you don’t want a lot of bells and whistles or you want an obscure language that is not provided by other systems Multibit’s a good choice.
Now the honorable mentions here, and there’s some big names on the list. The first is Coinbase. Now, this is a very popular and user friendly web wallet. It does integrate with bank accounts and it does have a mobile wallet that is used for spending. But the problem with Coinbase is its USA only and it is Bitcoin only. So it didn’t make our list of qualifiers. Mycelium is also extremely popular. This is a mobile wallet, you can download it from your favorite mobile app store. The unique thing about Mycelium is it supports trading so you actually have now a mobile wallet where you can trade Bitcoin. Again it didn’t have a lot of the other features that were on our qualifiers so it didn’t make our short list.
And finally, Xapo. Xapo’s a new comer, but they have a very good looking web wallet. They also provide debit card for spending. The reason why I put Xapo on the honorable mention’s list, they seem to have extremely good security and they offer fully insured cold storage.
So there you have it, there’s a complete list of fourteen wallets, a short list of seven and a set of three honorable mentions. There’s ten options, we’re bound to have covered something in there that would work for you. I encourage you to get out and try most of them. You can even try some of them out for free, you can download all of them without additional cost though you may have to register on the site etc. Blockchain.Info does provide a demo sites so you can actually kick the tires on that one, try it out, take it for a test drive without having to do anything or give up any information at all. But I definitely encourage you to try different systems, see what’s a good fit for your need. Some of them are feature rich for others, some of them are more user friendly than others, you need something you’re comfortable with because you want it to be something you use.
That’s the end of this lesson, coming up next is our final lesson in this course and it’s our Digital Currency Exchange Primer. Please join us for that.