BTC or Bitcoin is a digital currency with no physical existence, yet when you buy, sell or invest in BTC and plan to hold your assets you need storage for your currencies, just like for fiat currencies you carry a wallet.
Since bitcoin good investments digital currency, it is also kept in an electronic wallet, but unlike regular wallets, access to these digital wallets requires a private key that is both secure and secret.
A wallet app is programmed to automatically utilize a definite private key to authenticate any outgoing transaction as well as generate a wallet address dedicated to you.
Therefore, a Bitcoin wallet is not only safe storage for your Bitcoin holdings but also allows you to receive and send Bitcoin securely.
These wallets work by saving the cryptographic information about every Bitcoin or asset you store, need to access, or send for completing a transaction. While Bitcoin wallets are mostly dedicated to storing bitcoins only, some wallets let you store cryptocurrencies as well.
However, it is not the coins that save your private key, rather it is the device that you use for wallets that stores the private key.
Your wallet simply stores the encrypted information of your assets but in reality, it is the Bitcoin blockchain where your coins are stored, and to access them or to authorize transactions you need your wallet’s private key.
- Wallets are software apps that are empowered to store encrypted information about Bitcoin and generate a private key to initiate a transaction of your Bitcoin holdings.
- You can secure your access to the wallet or backup your wallet by storing the generally 12–24-word recovery phrase processed by the wallet during its inception.
- This recovery phrase is indeed the backup to recover all your assets in the wallet, and it essentially secures your holdings from trespasses, theft, tampering, etc.
Types of Bitcoin wallets
1. Mobile Wallets
In this age of the smartphone, mobile wallets for cryptocurrency allow you to take the best benefits of simplified payment verification technology.
You can easily carry the wallets with your smartphone and pay for any service by crypto.
This type of wallet operates with basically small subsets of the blockchain network. As a blockchain network operates, the transaction information is ensured through trusted nodes of the bitcoin blockchain.
Many mobile wallet apps take advantage of the smartphone’s near-field communication feature, also termed NFC.
This simplifies the usability of the wallet, for you don’t need to individually provide information, but can pay at any terminal with just a tap.
Some mobile wallets, however, employ two-factor authentication (2FA), which increases security by requiring a separate login name and password in order to access the wallet.
2. Web Wallets (exchange wallets)
Web wallets, also referred to as hot wallets, store your private keys on a server under the supervision and security of a third party.
It is sometimes not considered the safest storage, since constantly online. Most e-wallets work through exchanges.
3. Desktop wallets
These wallets are rather secure as they don’t rely on third-party control. Desktop wallets need to be downloaded and installed on your desktop or laptop.
Here the asset information, private keys, and essential data are stored either on your hard drive or SSD which is a solid-state drive.
The elimination of third-party reliability makes it rather secure compared to e-wallets.
4. Hardware Wallets
If you want optimum security, hardware wallets that store your private in a separate device, not linked to the internet, dependent on a third party, are the ideal pick. These devices could be pen drives, hard drives, etc.
5. Paper wallets
Many services allow investors to create random Bitcoin wallet addresses, which are then printed in the form of QR codes on paper, which can be easily scanned.
These services sometimes also offer tamper-resistant printing designs or custom holographic labels so that the private keys do not get destroyed easily.
It means, to prevent the private keys from being easily destroyed, these services occasionally also provide tamper-resistant printing layouts or customized holographic labels.
Well if you are now all set with Bitcoin wallet information, the next step to Bitcoin investment can be learnt from Bitcoin Trading In Easy Steps – Cheat-sheet, so that you can start away investing and trading in Bitcoin even if you are a beginner or layman.
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