Home Wallets Wallet Types: Exchange, Hardware, Software, Custodial, Bank

Wallet Types: Exchange, Hardware, Software, Custodial, Bank

Last updated on May 02, 2026

What the type is for

When you create a wallet, BitBooks asks for a type. The five options are:

  • EXCHANGE
  • HARDWARE
  • SOFTWARE
  • CUSTODIAL
  • BANK

The type doesn't change much functionally. It's mostly informational. It affects:

  • How the wallet groups on some reports (banks group separately from Bitcoin wallets)
  • What icons or labels appear in the UI
  • Which questions BitBooks asks during setup (a hardware wallet gets different prompts than a bank account)

Pick what feels closest. You can change it later.

EXCHANGE

A custodial wallet hosted at a cryptocurrency exchange.

Pick this for:

  • Coinbase
  • Kraken
  • Binance
  • Gemini
  • Bitstamp
  • Bitfinex
  • River Financial
  • Strike (when used as an exchange, not for Lightning routing)

What it implies: a third party holds your Bitcoin. They have the private keys. You have an account with them.

For BitBooks tracking purposes, an exchange wallet is treated like any other wallet. You record what came in and what went out. The auto-sync (when supported for the provider) pulls your transaction history.

HARDWARE

A self-custody hardware wallet.

Pick this for:

  • Trezor
  • Ledger
  • Coldcard
  • BitBox
  • Foundation Passport
  • Jade

What it implies: you hold the private keys, on a physical device. The wallet has no online API; you have to record transactions manually.

Hardware wallets in BitBooks are always manual (no auto-sync). You enter transactions when you make them, or import a CSV from your wallet software (Electrum, Sparrow, etc.).

SOFTWARE

A self-custody software wallet, or a watch-only setup.

Pick this for:

  • Electrum
  • Sparrow
  • BlueWallet
  • Wasabi
  • Specter
  • Phoenix (mobile Lightning)
  • An xpub watch-only wallet

What it implies: you hold the keys (or in xpub mode, you have visibility into addresses). No third party.

For Bitcoin Connections, the "xpub" provider lets you connect a software wallet in watch-only mode. BitBooks reads your address activity and imports it. See Connecting Your Bitcoin Wallet.

CUSTODIAL

A managed wallet provider that isn't an exchange.

Pick this for:

  • Blink (Lightning custodial)
  • Wallet of Satoshi
  • BTC Pay Server (when running custodially)
  • A managed Lightning service provider
  • Voltage cloud nodes (some setups)

What it implies: a third party holds keys for you, but they're not primarily an exchange. They're a wallet host.

Many Lightning wallets fall here. Blink is currently BitBooks' main supported custodial Lightning provider.

BANK

A traditional bank account or credit card.

Pick this for:

  • Checking accounts
  • Savings accounts
  • Money market accounts
  • Credit cards
  • Lines of credit
  • Cash on hand (treat the cash drawer as a "wallet")

The currency is fiat (USD, EUR, CAD, etc.).

BANK wallets are always manual today. We don't have bank feed integration yet. You import bank statements via CSV/OFX.

What if my wallet doesn't fit any of these?

Pick the closest. The categorization isn't strict.

Some examples:

  • A Bitcoin ATM. Nothing fits well; SOFTWARE is the most generic answer.
  • A vendor-issued voucher. BANK is fine; treat it as a bank account in a non-standard currency.
  • A credit-on-account at a Bitcoin business (e.g., you've prepaid for hosting). Probably not a wallet at all; record it as Accounts Receivable on a regular balance sheet account, not as a wallet.

The wallet types are a coarse classification. Don't agonize.

Mixing types

Most businesses have several wallets across different types:

  • 1 BANK (the primary checking)
  • 1 BANK (the credit card)
  • 1 EXCHANGE (Coinbase or similar, for buying BTC)
  • 1 CUSTODIAL (Blink for Lightning ops)
  • 1 HARDWARE or SOFTWARE (cold storage)

Each is a separate wallet with its own balance and transaction history.

Changing the type after creation

Allowed any time. Open the wallet, click Edit, change the type, save. The corresponding Chart of Accounts entry updates.

This won't break anything. The type is metadata; it doesn't affect the underlying transactions or balances.

Where to go next