A Bitcoin wallet is what one uses to store and spend Bitcoins; composed of two parts, a public address and a private key, Bitcoin wallets are much like a post office box: they have an address that you can share with anyone, but a key that only you hold. Owning the key is what enables you to spend the Bitcoins that are located at your “address”.
Your private key is like the DNA of your Bitcoin wallet. From the private key alone, one can determine your Bitcoin address and create a doorway to your cache, i.e., access and spend your Bitcoins. Since the private key is the most important component of all this information, the only way to protect your Bitcoin wallet is to protect your private key. Deciding how you will protect your private key is where your options come into play.
A few different Bitcoin wallet options are listed below:
The original Bitcoin peer-to-peer open source software created by Bitcoin’s enigmatic founder, Satoshi Nakamoto, this is the core of the Bitcoin system and anybody can download it for free to their desktops. It contains the public ledger that lists every Bitcoin transaction in the system. The main drawback of Bitcoin-QT is that it is only desktop-based; it cannot be used on a smartphone. The upside is you are personally in control of your private key. This is considered the most secure wallet choice.
A smartphone app that works on Android and Blackberry, this app is the best choice for those who want an easy to use wallet on the go. Requiring no third parties whatsoever to continue functioning, you are in direct, exclusive control of your own private key.
This means, however, that if you forget to back up your private key and your phone breaks or is lost, your funds are gone forever. If you need access to your Bitcoin wallet away from home and you want total security, this is the option for you.
This is a very mobile, very easy-to-use Bitcoin wallet that has several convenient (if not secure) advantages: firstly, it allows users to send and receive funds via their personal email address, rather than having to use your Bitcoin address; secondly, it can be used via the internet or a smart phone.
This cross-platform compatibility gives it an edge over Bitcoin Wallet and Bitcoin-QT. However, in order to achieve this, Coinbase controls your private key, making it more or less like a bank account: when you have dollar bills in your wallet you have full control of your money, but when you deposit them in the bank they have control of your money. Fine as long as the company is secure and trustworthy, but these two are hard to come by when large amounts of money are being held on the internet.
Blockchain is a hybrid between an online wallet and a desktop client and seeks to offer close to desktop-level security with the convenience of an online application. Unlike the alternatives, Blockchain works by storing your wallet encrypted, and running the code necessary to decrypt your wallet and sign transactions in your browser, so the operators of Blockchain have no way to access your funds.
This is better than Coinbase, because security is not as big an issue, but in order to make the most of the increased security, users should download the extension for Chrome/Firefox.
The advanced options such as the ability to download and backup your wallet to your computer or a printed sheet of paper, private key import and export, and offline transaction mode make Blockchain the most well-rounded, secure and easy to use wallet available today.