What is a Bitcoin wallet and why do we need it?
Bitcoin, unlike most of traditional currencies, is a digital currency. Thus, when it comes to acquiring and storing. you need a completely different approach. As Bitcoins don’t exist in any physical shape or form, they can’t technically be stored anywhere. Instead, there are private keys used to access your public Bitcoin address and sign for transactions that need to be securely stored. A combination of the recipient’s public key and your private key is what makes a Bitcoin transaction possible. Unlike physical wallets, Bitcoin wallet comes in many types.
Similarly, in the world of cryptocurrencies, we need wallets to hold our cryptocurrencies. Just like what we keep our cash money in.
Bitcoin is one of the most popular and widely used cryptocurrencies, and it requires a wallet to hold it in. Unlike physical wallets, Bitcoin wallet comes in many types.
There are several different forms of Bitcoin wallet, catering for different requirements and varying in terms of safety and security, convenience, accessibility, etc.
For understanding Bitcoin wallets, let’s take a look at something similar, email accounts.
Imagine you have your email address based on which service you are using like email@example.com
This is a public address(everyone can see it, and you can share it with anyone for receiving emails). You also have a software/service like Gmail or Hotmail through which you send and receive your mails.
And you have a password to log in to your email service to send mail to others’ email IDs (others’ public addresses). But your password is confidential and private for your own use and theirs is confidential for their own use.
The software/service understands the public address (firstname.lastname@example.org) and your password (private address)to successfully log you in and send/receive/store emails.
Similarly, for sending/receiving/storing bitcoins, we require a wallet on the Bitcoin network, which is a place for storing our public address(a place to receive bitcoins) and a private address(to send/spend bitcoins). In an even more simplified way, a wallet is a digital file which stores your bitcoins.
- Bitcoin Address + Private Key = Bitcoin Wallet
So what kinds of Bitcoin wallets exist on the market?
Different types of Bitcoin wallets:
There are a lot of Bitcoin wallet types available out there in the Bitcoin world. I have classified them based on certain criteria such as online connectivity, custodianship, and device availability.
Bitcoin Hardware Wallets
At the time of this writing, there has been no reported theft or loss of bitcoins from a hardware wallet. The private keys and digital signature needed to spend bitcoins are generated via these wallets. These are some hardware wallets:
Mobile Bitcoin Wallets
Bitcoin wallet applications which can be installed on mobile phones are called mobile wallets. For each mobile operating system, such as iOS, Android, Windows, and Blackberry, compatible wallets are available. India’s Bitcoin space has Unocoin, as the leading platforms.
These are the various Bitcoin mobile wallets and each mobile OS adaptability. The one that I prefer to use is MyCelium on Android. They have integrated a lot of security measures. At the same time, there are many more mobile wallets that you can pick based on your smartphone’s OS.
Desktop wallets are Bitcoin wallets which can be installed on different desktops and adapted with Windows, Mac, and Linux.
Below are various Bitcoin desktop wallets compatible with all operating systems:
Bitcoin Desktop Wallets
- Bitcoin Core
Web Bitcoin Wallets (aka Hot/Online/Hosted Wallets)
Wallets which are basically web services and are accessible through web/internet-based browsers such as Google Chrome, Firefox, and IE are called web-based Bitcoin wallets.
The private keys are held online in these kinds of wallets. They are accessible via an internet address such as https://xyz.com.
They are also called “hosted wallets” as you store your bitcoins on the servers of the agency which you have chosen as your online wallet.
Bitcoin Web Wallets
Paper Bitcoin Wallets (aka Cold Storage Wallet)
Paper wallets are a piece of paper with a public address and the private address printed on them.
You can use the public address to send any amount of bitcoins. You can then save the piece of paper as it also contains the private key which can be used to transfer/spend bitcoins or sweep the Bitcoin paper wallet completely to another wallet.
Since the keys are offline, they are printed and secured by the owner and there is no threat of any electronic damage to bitcoins unless the printed keys are lost.
Which wallets do you prefer to use? Have you used any on this list? Let us know in the comments below!
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