Before we start with the whole concept of ‘What is Bitcoin Wallet’, let us first see in brief what a bitcoin is? Bitcoin is considered as a decentralized form of money. It is like a virtual bank which is influenced by the pressure of demand and supply during the per day trading volume. Bitcoin works like fiat cash since one party pays and other merchandise or enterprise accepts it. If we talk about procuring Bitcoins, then there are three methods through which we can possess bitcoins, which are as follows:
Mine them – Bitcoin mining is a procedure that secures the system, and in the meantime compensates the miners with crypto coins.
Purchase them – The exchange is a middle authority which is facilitating the entire trade of cryptocurrencies under one roof. As banks help in circulation of money similarly, Exchanges help in circulation of Cryptocurrencies.
Accept them against a good sold or any service provided.
When once you have procured your desired number of bitcoins through one of the above methods, now the need arises to store them. In simple words the question of “How to store these Bitcoins safely?” arises. As with fiat money, we store them in our purse or wallet, similar is the case with cryptocurrency also. We need a wallet to store them. So let us understand what is a bitcoin wallet?
What is a bitcoin wallet?
A Bitcoin Wallet is a software program, where Bitcoins are saved for long-term or maybe short-term purpose. But if we technically understand this fact closely we will find that every Bitcoin has its own secret keys and that coding is used to link bitcoin with wallet; having which means carrying a balance in it. A bitcoin wallet is used to send and receive Bitcoins and secret keys or password is used to do the same.
If we analyze technically then we will find that there are many kinds of the wallet which are available in the market globally. These wallets are:
A bitcoin wallet is also called as a digital wallet and no one can ignore it, as technically it plays an important role in the trading of Bitcoins or Altcoins.
A bitcoin wallet is an analog to physical wallet where with the help of coding one can get or one can receive bitcoins.
These are programmed wallet which facilitates user-friendly interface for the investor to conduct any kind of bitcoin transactions
which includes Receiving as well as sending cryptocurrencies by using valid passwords and secret codes.
The term Bitcoin address is associated with transactions of the clients. The transaction should be done neat and for that, the authentic address is required. It is a kind of alphanumeric code assigned to every bitcoin wallet.
After observing the concept of Bitcoin Wallet, let us now pay attention towards the various types of Wallets, which are available globally to keep the crypto coins safe and sound.
What are various Types of Bitcoin wallet?
Based on the need of the people and technical availability of the hardware to carry these Bitcoin wallets, they are classified into various types. The basic attributes of any of such wallet are:
Let’s now understand each wallet in detail:
1) Desktop wallet
These wallets first of all need to be downloaded on the computer and then installed. Thus a private key gets stored in the hard-drive. The mobile wallets and online wallets (that we would read further) are very less secure as compared to Desktop wallets. As desktop wallet doesn’t require any third party for storing the coins thus the probability of theft is quite low. However, due to the usage of the internet, it again becomes insecure. The desktop wallet is basically a software-based application which has two versions:
full node (which store complete blockchain information) and
Light node version.
Full node has the capability to access the records of complete blockchain records whereas light version store information based on the memory of the device. Following are a few examples of the desktop wallet:
2) Mobile Wallet –
With the passage of time and with technological advancement & evolution smart-phones came into existence, and Bitcoin wallets commenced to be designed in the form of mobile application. The mobile wallet as the name suggests runs on a mobile phone and with the help of NFC scanning QR code, it is functionally operated.
SPV i.e. Simplified Payment Verification Technology is helping people in using this wallet very easily as there is a small-subset of the Blockchain which is installed.
But a major disadvantage with this wallet is that it is not hacker free.
It can be easily hacked by professional hackers.
Also if you lose your mobile phone you simply lose access to your wallet too.
The wallet is operational on iPhone as well as Android phones.
3) Hardware wallet
This storage is also known as Cold storage. This wallet is far more secure than any other kind of wallet available. As a safe hardware device is used to store the private key of the client, it is best for storing any number of Bitcoins.
It is a kind of Offline storage linked with the online front end to make the transactions of bitcoins safe. Cybersecurity and cyber attacks from online sources have to be taken care therefore at the backend these wallets are used to avoid hacking or theft risks. There hasn’t been any such case where a theft from this wallet has been observed. However, your bitcoins would remain safe until the time a device from a reputed and trustworthy manufacturer is used.
4) Web wallets
In this wallet, a server of a company is used to store your own private key. These are highly active wallets. During the time of market transactions are carried and once transactions are complete it is saved and kept secure with proper password and needful secret keys. These e-wallets are much like mobile wallets and are considered as easy to use from any of the devices that you possess having access to the internet. The server where your private key is stored remains online all the time.
A major disadvantage with this wallet is that the server where your key is stored is in control of someone else and thus has a full control of your crypto coins too. Thus, increasing the chances of theft of all the coins stored on the entire server. Certain web wallets take the help of exchanges as their base, and in past, there had been cases where the whole exchange was shut-down as they ran away with all the funds of all the users.
5) Paper wallets
Coded information can be secured on the paper and could be exchanged between two parties as the document of trust. It is an important piece of informational document that has a public address and also a key. This address could be utilized to send or to receive crypto coins which are safely stored at that particular address. While making a transaction you simply need to scan this key which is in the format of QR codes. These Paper wallets to be actively used need to be printed.
Earlier paper-form of the document was used as no- online technologies were developed. But the trend now has changed and wallets came into existence for better
The major use of these wallets is that it is hacking free because it is not stored in digital format. There are a few safety precautions to be followed is that
While generating the wallet you must not be watched by anyone.
They should be kept away from wet places as wallets are in paper format.
Thus it can be laminated and then stored in a safe and secure place
A deposit box can be a safe place to store them.
After observing the whole concept of Bitcoin, the Bitcoin wallet, and types of Bitcoin wallets, it is now time to know in short that why do we at all need a Bitcoin wallet?
What is the need to buy a bitcoin wallet?
Being a digital currency the need of a safe and secure platform is of great importance. As we have clearly understood by now that any cryptocurrency, including bitcoin, cannot and does not exist in physical format.
You cannot see it or
You cannot touch it.
Thus there cannot be a physical place to store them like bank or locker. Use of a private key and a public key together helps in accomplishing a bitcoin trade. The bitcoin wallets thus exists.
What is Bitcoin Address?
A bitcoin address is a kind of CRM (“customer relationship management”) number which helps in sending and receiving the payments. It can be also used for doing other practical daily transactions. Sample code – 123ATYUGDWG3GMSDjftnfKWpyEGHgsW9DymN
Who should be your wallet provider?
The market is open, choose according to your sweet will and wise decision is required based on the credentials of the vendor.
Experience of the vendor is very important.
Based on his reputation one should take the decision about the vendor, a good word of mouth matter a lot!
To conclude the talk about Bitcoin Wallet we should know certain threats while using any wallet and several safety measures to be taken care of:
What could be the problems faced by a Bitcoin wallet user?
The possible problems which can arise while using any of the bitcoin wallets could be summed up as:
The exchange on which wallet operates may run away with your funds
You can lose all your bitcoins as your private key can be scanned through a malware send through a malicious-software.
You can lose your funds if you lose your device on which wallet has been installed.
Constant connectivity to the internet makes the wallet prone to theft of coins.
Thus be cautious while choosing a correct bitcoin wallet and invest safe!
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