The Cryptopay blog
The Cryptopay blog

Bitcoin Software Wallet vs Web Wallet

What’s bitcoin wallet in its core? Well, it looks just as any Paypal or WebMoney account, but it is very different in how it stores your money or process payments.

Unlike traditional payment systems with regular currencies, bitcoin wallet doesn’t store your funds at all. It secures your encrypted private and public keys to the bitcoin blockchain instead. So, your coins are not located in your wallet, they are in the blockchain. The very interface that makes the blockchain data look like you see numbers right here on the account — is a bitcoin wallet.

Most of the bitcoin-driven folks use either Desktop/Software or Web/Hosted wallets for transactions and purchases. While both are 100% genuine bitcoin wallets, there’s something a bit different in a way they work with stored data.

Desktop Bitcoin Wallet

Desktop wallet needs to be installed as any other piece of software, that’s why it also known as a “Software wallet”. It will download the whole blockchain (~50GB) of all blockchain transaction history, and will store some blocks locally, which will also result in reducing your hard drive capacity. While desktop wallet is installed locally, it sends all requests to web-service and can receive or send messages to the bitcoin network. If you’ve downloaded the core bitcoin wallet, you can run a full-scale wallet and a node within blockchain network.

Lightweight wallets, like an Electrum portable version provide the same service with a trade-off: less secure, but much smaller and faster. These wallets store block headers only and compare their hash to the one in the blockchain to ensure if you have enough funds to spend.

software-bitcoin-wallet

If your hard drive gets corrupted or stolen, or the whole machine is hacked, your bitcoins in software/desktop wallet are in great danger. This is a good reason to get deeper in the security techniques, install backup software and implement procedures, like wallet address rotation and manual backup. In other words it’s wise to use such wallet, if you’re a tech-savvy person.

Another wallet type you may encounter on the Web is hosted wallets. Though their working principles are pretty similar, these wallets has their own pros and cons.

Web-based Bitcoin Wallet

Hosted or web-based wallets store your keys online and can be reached from any point on Earth that has an internet connection. In this case, your keys are stored with a third-party company, which means you should look sharp and choose a reliable provider. But there’s an advantage: providers also takes care over address rotation, backup and overall wallet security.

No service wants to be hacked and lose its reputation, but sometimes it just happens. The best strategy is to choose a reliable bitcoin wallet provider (over 3 years on the market) who could offer strict security measures and experience of solving different problems.

web-based-bitcoin-wallet

Web-wallets usually offer some support services that can make your experience with bitcoins even better. Most of them integrate a bitcoin exchange service. Some, like Cryptopay, also have plastic and virtual cards that are designed to ease the bitcoin purchases, transfers and withdrawals.

And the Winner Is?

In this article we’ve examined two types of bitcoin wallet: Software and Hosted, with all advantages and disadvantages they have. And it’s time to say which one you should use. Luckily, there is no winner or loser in this competition as there is no mandatory choice. In real life you can benefit from using both types simultaneously.

The main trade-off is: level of access vs. level of security.

Although software wallets considered to be more secure, it doesn’t mean your money can’t slip away one day. All security procedures with desktop wallet require a user to be tech-savvy, disciplined and have free time. If you’ve recognized yourself, go ahead.

Web-based wallets in their turn require the significant trust between a provider and a user, since all funds are in the hands of the service. The advantage is that coins are accessible from anywhere and you don’t have to worry about the security ever again. We definitely recommend this type of wallet for novice users.

Just make sure you know how to make your wallet more secure.

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