Bitcoin clients have been downloaded onto your computer as normal programs in the past. Bitcoin transactions are received, verified, and sent by your computer, which is directly connected to the Bitcoin network.

The following are some advantages:

  • Relies only on the Bitcoin blockchain itself and does not require any external services
  • It is impossible to link transactions from different addresses together, so you are more protected. The same way that information is removed from coins when using Bitcoin tumblers is the same as when using exchanges. You must ensure your privacy when managing your wallet on your own. Although you can take your anonymity as far as you want, complete anonymity is not guaranteed. It is possible to protect your privacy by using multiple bitcoin wallets to prevent transactions from being mixed between armoury and multibit wallets.
  • Dropbox and Wuala let you share your wallet.dat file. Back up your wallet.dat file and store it on a file-syncing service. Now that multiple Bitcoin clients, including Armory, can encrypt the wallet.dat file (Multibit still does not), you are less likely to lose your bitcoins if someone else gets a hold of the file.
  • However, the client software should be verified or trusted by someone, and you do not need to trust the provider)

The following are some disadvantages:

  • Managing it takes more time and effort
  • Downloading the complete Bitcoin blockchain, which has grown to 1 GB in size, is needed for the wallet. In Multibit, the blockchain is stored without transactions, reducing storage space to 20 MB (although bandwidth consumed remains the same), but making it hard to check which bitcoins are spent and which are unspent for backups since the entire blockchain needs to be viewed over the internet to be able to track which bitcoins are spent.
  • One computer can access your wallet. Two imperfect solutions exist to this problem: you can keep your wallet on a file syncing service, such as Dropbox or Wuala, allowing you to log in to your wallet from any computer or phone you control, but it requires you to constantly back it up and update it, since if you do not, the wallet might attempt to spend bitcoin that was already spent earlier, resulting in an error.

These types of wallets are available on the desktop in the form of the Bitcoin client, Armory and Multibit, and on mobile devices in the form of Andreas Schildbach’s Bitcoin Wallet (available on Android only) and Bitpak (available on iPhone only; $3.99).

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