The Advantages of Online Bitcoin Wallets
Using an online wallet, or web wallet, to store your Bitcoins offers a range of advantages over a regular desktop wallet saved onto your computer.
The main benefit of an online wallet is the fact that you can effectively outsource the security of your coins to a professional. This means that you don't need to worry backing up your wallet yourself so that you don't lose all of your coins if your computer breaks down, and it means that you don't need to worry about protecting your machine from hackers looking to steal Bitcoins yourself. Of course hackers can target web wallets too, and you need to trust the company providing this service to take adequate security measures and not to run away with your coins themselves - so to some people this is a disadvanage, but to many regular users it is a relief to put the whole issue of security into someone else's hands.
Storing coins online in a web wallet also means that you can access and spend them from a range of different devices, no matter where you are or what gadgets you have with you - as long as you can access the internet you can spend your coins.
In addition to these basic advantages, many web wallets offer a range of advanced features to entice you, some of which you will find below in my top list of the best Bitcoin web wallets.
The Browser Bank
The main drawback with web wallets is that you have to entrust your 'private key' to somebody else. The private key is like a long an super-secure password which gives its owner the right to spend the coins in a given public address, or wallet. With most web wallets this private key is stored on the servers of the company running the wallet, and you get access to it when you log in to your account with them. There are two problems with this. Firstly it is a lot easier for hackers to target a single public server with thousands of wallet on it than to try to hack into 1000s of home computers. Secondly, the company themselves can move your coins around which opens up the temptation for them to engage in fraudulent practices if their business is struggling, or to engage in the kind of dangerous practices which the banking idustry engages in by risking your coins to increase their profits through fractional reserve and casino banking style investments.
An added advantage is that you can access your account from any other site running the same open source software - see TheBrowserBank.com for more information.
Blockchain is one of the oldest and most respected services for creating an online wallet for Bitcoin. Unlike most other web wallet services you get full control of the secret key for your Blockchain wallet. This protects you from fraudulent activities by making it impossible for Blockchain themselves to take money out of your wallet. It also means that you can use your wallet with third party services built on top of the Bitcoin block chain such as MasterCoin.
Coinbase is now one of the most popular online web wallets for Bitcoin. You do not get full control of your wallet and its secret key in the same way that you do with something like Blockchain.info, but in return for relinquishing control you get a range of extra features.
In many ways, Coinbase is like the Paypal of Bitcoin. You can connect your Coinbase account to your bank account, making it as easy as possible to buy and sell Bitcoins for your national fiat currency. The service also integrates with a wide range of different merchants, to make spending your coins as easy as possible as well.
The aim of BitcoinWallet.com is to make sending and receiving bitcoins as easy as sending an email.
One problem which can put new users off Bitcoin is the fact that your wallet address looks like a long list of random characters. That means that you can't just memorise your address and tell it to other people, and when sending money you often need to either copy and past the address or use a QR code.
When you open a new BitcoinWallet.com account you choose a username that looks like this: yourname.bitcoinwallet.com. Other people who use the same wallet service can then send money to you using your easily recognisable and typable address - much more user friendly that regular Bitcoin addresses.
Sending money to other users of BitcoinWallet is free, but there is a 0.0008 BTC fee for sending to or receiving from any other type of wallet.
StrongCoin claims to be the longest running Bitcoin wallet service, and whilst it seems to promote itself primarily based on safety and security it also boasts a range of other advanced features.
These features include a distributed exchange for buying and selling Bitcoin through a decentralized peer to peer market, and a trustless escrow service to improve consumer protections when buying products online using digital currency.
Netagio specialises in secure storage - of both Bitcoins and gold - and you can actually store both through the same account.
The majority of Bitcoins belonging to Netagio customers are stored offline in 'cold storage' wallets to improve security, with money for transactions being sent from 'hot wallets' as and when they are needed.
Like Coinbase, Netagio also offers services forexchanging digital currency with your national fiat money.
One of the problems with Bitcoin is its volatile price, which often rises or falls by 5 or even 10% or more in a single day. That is great for speculators and investors who want to try to make money from buying cheap and then selling for more later, but for regular users who just want to hold some money in digitial form and use it to buy things over the internet or send to friends and relatives overseas, it can be a nightmare - because you don't really know how much money you will have from one day to the next.
Bit Reserve is one of a new breed of wallet services which aim to get rid of this volatility problem, by allowing you to keep your wallet balance in fiat money such as USD. What this means is that if you send $10 worth of Bitcoins to a JAGO wallet, it will stay at $10 worth regardless of what happens to the price of Bitcoin.
Ripple provides an online wallet which you can use to receive, store and send Bitcoins, as well as a wide range of other currencies and assets. You can even keep national fiat currencies like $ and £ in your Ripple wallet.
When you open a Ripple trade wallet (a new piece of software which is different from the one features on their homepage) you are given a Bitcoin address that you can use to receive Bitcoins from any wallet, and you can send Bitcoins from Ripple to any other wallet without paying any fees - even the usual Bitcoin transaction fee.
There is a peer to peer market within the Ripple wallet which you can use to trade between the various currencies which you can store in your wallet, and you can withdraw currencies like USD from a range of different 'gateways'. The number of fiat currencies supported within Ripple is constantly growing, but already encompasses dozens of different countries around the world.
Like BitcoinWallet.com, Ripple also supports a names feature so that your address is effectively your username rather than a cumbersome string of random looking letters and numbers.
Multi-Signature Web Wallets
The latest new trend for digital wallets is multi signature functionality. Basically this means that a single wallet has multiple users, and each person must approve a transaction before it goes through.
This multi-signature function is great for improving security, as hackers would have to compromise multiple passwords to take money out of an account. It is also very handy for businesses where approval is needed from a manager for any spending, or where there may be concerns about a single employee having sole control over compny funds.
MultiSigPlus is proving how confident they are about the improved security offered by this multi-signature approach by offering a 125% guarantee - meaning that if any of your funds are lost to theft or fraud by hackers they will give you back everything you lost plus an extra 25%. They also allow for holding multiple currencies in a single account, including Bitcoin, Litecoin, Dogecoin, and have plans to add more in the future.