Creating a Bitcoin address does not require the technical savvy it once did. Now, it is as simple as creating a wallet. In most cases, users do not even need to register in order to get started.

What Are Bitcoin Addresses?

Addresses are a key piece of the blockchain infrastructure, allowing users to buy, sell, trade, transfer and store their holdings.

In the most basic terms, a Bitcoin address is just like an email address.

Though it’s not quite that simple, it follows the same basic principle: it is the address users to receive bitcoin or the address from which users send bitcoin. The difference however, is that bitcoin addresses are built on asymmetric key cryptography, or public key cryptography, and a user can create a new address for each transaction.

One half of this cryptography protocol, the public key, can be shared with anyone – this is used to receive transactions. The other half, the private key, essentially verifies the ownership of bitcoins, and it is used as a sort of a digital signature in order to safely send transactions. The two keys together are able create as many addresses used to send or receive bitcoins as desired, but the addresses cannot be used to generate a key.

While it is not required to create a new address for every transaction, doing so helps users mask their transactions from the public.

The process of creating a new address used to require some technical knowledge, the evolution of bitcoin wallets has drastically simplified the process. Now, users are able to create a wallet, in most cases, choose whether or not they would like to create a new address when making a transaction.

What Are Bitcoin Wallets?

Bitcoin wallets, like regular wallets are where users store their funds. They can be applications on a cellular phone, a website, a device or even a simple sheet of paper.

There are many different types of wallets all offering different features and levels of security. Wallets are often built using open-source technology, allowing developers to test, expand on and fix bugs in the original programming.

There are four basic types of wallets: hardware wallets, paper wallets, software wallets, and exchange-based wallets.

Exchange-based Wallets

The first wallets many users are exposed to are exchange-based wallets. These are web-based wallets created by exchanges for their customers. Typically, these services do not allow users to have access to their private key, and in turn, users are generally not allowed to create a new address at their whim.

Additionally, exchange-based wallets are subject to malicious attack. If an exchange is hacked, there is no guarantee that a user will have their funds returned. These wallets are widely considered the least secure option to store bitcoins.

Exchange-based wallet examples:

Coinbase – Coinbase is one of the world’s largest bitcoin exchanges. Though Coinbase has a high reputation for thee security of users’ funds, it has been met with criticism for how it has handled the ‘forks’ of different cryptocurrencies. When a ‘fork’ occurs, users are entitled to the same amount of the new coin created from the fork as their current holdings of the coin that was forked. Because Coinbase users do not have access to their private key, Coinbase has often denied or delayed the issuance of the new coin.

Kraken – Kraken is another large cryptocurrency exchange. Though users are able to store bitcoin in their Kraken accounts, the company explicitly states that it is not a wallet service, highlighting that users will not be able to receive airdrops or forks. The website even warns users not to send funds to if the sending address is of importance as all coins that are sent are done so through Kraken’s corporate hot wallet.

Hardware Wallets

Hardware wallets are essentially USB drives that allow for the ‘cold storage’ of bitcoins, meaning that that bitcoins can be stored offline in order to protect users from potential security threats. They are generally considered the de facto leaders in functionality and security They also allow users to create addresses offline, adding another layer of anonymity to the experience.

Hardware wallet examples:

Trezor – Trezor is a bitcoin hardware wallet released in 2014. It allows the cold storage of bitcoin and other cryptocurrencies with privacy and security as a top priority. Users own the private keys and can even create a back up seed phrase allowing users to recover the bitcoin if anything were to happen to the wallet. Trezor also automatically creates new addresses for each transaction to ensure the privacy of its users.

Ledger Nano S – Ledger Wallet has long been a leader in cryptocurrency security. Its latest generation, the Nano S, offers many features similar to its competition, Trezor. It is slightly more compact and looks just like a USD thumb drive. Like Trezor, Nano S also generates new bitcoin addresses for each transaction.

Software Wallets

Software wallets come in all shapes and sizes and offer a wider range of features than hardware wallets. Many software wallets have even integrated the ability to buy and sell bitcoin directly, though users are required to link a bank account or debit card which forfeits some of the privacy enjoyed by users of hardware wallets. All software wallets give users the complete control over their private key, and the vast majority either automatically create new bitcoin addresses or allow users to use new addresses as they see fit.

There are two primary types of software wallets, desktop wallets and mobile wallets. Though both offer a high level of security, users should take basic security measures into account when opening the applications to ensure that their connections are secure.

Software wallet examples:

(Desktop) Bitcoin Core – As one of the original bitcoin wallets, Bitcoin Core enjoys a level of trust and reliability that some unproven applications do not. It is unique compared to its competition in that users are required to download the entire copy of the Bitcoin blockchain in order to use the wallet. While this causes some slowdowns, it does allow users to contribute to the security of the entire bitcoin infrastructure.

(Desktop) Exodus – Exodus is a very user-friendly option for newcomers to the cryptocurrency space. It offers a sleek user interface and a wide range of different assets that are easily swapped thanks to its Shapeshift integration. It also requires users to create a passphrase to access the wallet, enhancing some of the security of the wallet. Creating new addresses in the Exodus wallet is just a click of a button.

(Desktop)(Mobile) Jaxx – Jaxx is an ambitious platform that offers seamless integration between both its desktop and mobile applications. It allows users access to a large number of cryptocurrencies in a straightforward manner. Like Exodus, it also allows users to swap between cryptocurrencies seamlessly. And because Jaxx also automatically creates new bitcoin addresses for every transaction, there is no need for users to do so themselves.

(Mobile) BRD – Formally Bread Wallet, BRD is an easy-to-use platform which recently began offering ethereum and a number of ERC20 tokens, in addition to bitcoin. BRD gives users the ability to buy or sell bitcoin directly from the application. BRD also creates new bitcoin addresses for every transaction.

Paper Wallets

In the right hands, paper wallets are the most secure of any other wallets. They can be created and stored offline meaning that unless something happens to the piece of paper, the bitcoin is not going anywhere.

Though paper wallets are highly secure, they are limited in their functionality and require some degree of technical knowledge to set up.

To set up a paper wallet in the most secure means possible, users are recommended to effectively download the paper wallet website of their choosing (Walletgenerator or Bitaddress are two options), transfer it the site to a computer that has never been and never will be connected to the internet, create the wallet, and then print it out on a Wifi-free printer. This can be quite the undertaking but considering the paper that is printed could potentially hold a lot of bitcoins, it is worth it to some.

Many people have even created stylized cards, hidden the wallets in paintings or engraved the address in other valuables.

While it is the most secure means of storing bitcoin, because only one address is created, it is not possible to hide transactions in the same way other wallets are able to.

Security Tips

With so much at stake, users should always think about the security of their funds. No matter which wallet is being used, a few basic security tips can make a world of difference:

Never give out your private key. This is the number one most important thing that any newcomer in the cryptocurrency world should remember. The private key is your digital signature. Anyone with this key can access your holdings, and make no mistake, bad actors have thought up some creative ways to get that information off of you, from free offerings to urgent security updates, they will try anything and everything to get that key. Never share it with anyone.

Do not log into your bitcoin wallets on public networks. As tempting as it is to see how much your portfolio has grown while you’re sipping a latte at Starbucks, just don’t do it. All it takes is for one man-in-the-middle attack to drain your funds.

Don’t share the value of your holdings with anyone. You may be excited that you just got your first full bitcoin, but sharing that information only makes you a target. Think of the contents of your bitcoin wallet as the contents of your actual wallet. You wouldn’t walk into a crowded street and advertising how much money is in your pocket, so don’t do that with your bitcoin holdings, either.

Always double check the addresses before sending or receiving funds. Though many wallets facilitate the process with QR codes or simple copy+paste options, make sure the address is correct anyway.