The two main ways to create a Bitcoin Cash wallet are:
(1) Install the app on your mobile device/desktop.
(2) Create an account with a cryptocurrency exchange.
There are a variety of Bitcoin Cash wallets to choose from. However, not all are created equal! In some cases, the wallet provider actually controls your Bitcoin Cash – which contradicts the spirit of decentralization and limits your economic freedom.
Software wallets
Good for: buying, selling, storing, trading, and using moderate amounts of bitcoin cash.
A software wallet is an app you download to your phone or desktop. You can use it to, for example, easily spend bitcoin cash in store or online.
The best software wallets are non-custodial , meaning the wallet provider never has access to your funds. This protects you from the risk of fraud or bankruptcy by the wallet provider. With a non-custodial wallet, you – and only you – will always retain 100% control over your funds.
Software wallets are exposed to the Internet. Technically, this makes them less secure than ‘hardware wallets’ (see below). That being said, software wallet hacking incidents are extremely rare. By far the greater risk for most people is that you’ll lose access to your wallet by forgetting your ‘private key.’
Hardware wallets
Good for: long-term storage of larger amounts of bitcoin cash.
Hardware wallets are physical devices that provide an extra layer of protection for crypto assets. They do this by never directly connecting to the Internet, a feature that protects you from virtually all hacking vectors.
Although the most secure digital wallet type, hardware wallets require a few additional steps in order to make transactions. Essentially, you need to confirm all transactions on both your mobile device / desktop and your externally connect hardware device. This makes hardware wallets less convenient, especially when it comes to use cases like small, everyday transactions while you’re on the go.
Hardware wallets aren’t free. They typically cost in the range of $100. This can be considered a wise investment if you’re storing a significant amount of bitcoin cash and other cryptocurrencies.
Important: Just like with software wallets, you need to back up your private keys and adhere to password management best practices.
Web wallets (cryptocurrency exchanges)
Good for: buying, selling, and trading bitcoin cash and other cryptocurrencies.
Centralized cryptocurrency exchanges are like traditional stock trading accounts. You open an account, verify your identity, send local currency, and buy & trade assets.
Any crypto you hold on a centralized exchange is held on your behalf by the exchange. This has important implications. On the plus side, if you lose your password, you should be able to gain access to your funds by interacting with the exchanges’ support staff. On the other hand, since the exchange is technically in control of your crypto, you are exposed to the risk of the exchange getting hacked or going bankrupt. Not only that, it also generally takes longer to withdraw your bitcoin cash and other cryptos, and you’ll pay high transaction fees for withdrawals. This means web wallets aren’t the best solution for using your bitcoin cash and other cryptocurrencies.
Paper wallets
Good for: low-cost, long-term storage and gifting bitcoin cash in a unique way.
A paper wallet is literally a piece of paper with a private/public key-pair written or printed on it.
To make a paper wallet, you run a software package that generates a private/public key pair (which you can print out on a piece of paper).
You can send any amount of bitcoin cash to the paper wallet address.
To spend the contents of the wallet, you’ll use the private key written on the paper in combination with the public address (also written on the paper). This will allow you to conveniently spend the bitcoin cash it contains.
Since a paper wallet is literally paper, you can use it to gift any amount of bitcoin cash by simply handing over the paper wallet directly to another person, just like you would do with cash. This makes it a unique way to interact with Bitcoin Cash.