A Bitcoin wallet is a unique software that allows individuals to store their Bitcoins safely. Technically, Bitcoin cannot be saved because it is not a physical asset. But since the bitcoin cannot be stored in a technical sense, what is instead secured is the private key that enables you to access your bitcoin wallet.
Every Bitcoin transaction on the wallet makes use of two levels of securities, a public address and a private key.
A private key is a complex cryptographic code that is unique to each Bitcoin wallet. On the other hand, the public key allows one to send and receive cryptocurrencies and are created from the private key. A public address can be compared to a bank account that acts as the identity of the wallet.
Types of Bitcoin Wallets
Securing your Bitcoin through a Bitcoin wallet is an essential part of cryptocurrency trading. There are different types of Bitcoin wallets. Each of the wallets has specific features that make it the choicest wallet by users. Here, are some of the different kinds of Bitcoin wallets used by Bitcoin investors:
A desktop wallet is a type of Bitcoin wallet that is installed on a desktop computer and used to store cryptocurrency. They allow users to send and receive Bitcoin from their desktop computers as well as save their private key directly on their hard drive.
This is a more secure option than web or mobile wallets since third-party applications do not store your private key. It, however, has considerably less flexibility and accessibility than mobile wallets and web wallets. Some popular desktop wallets include Bitcoin Core, MultiBit, Armory, Hive OS X, and Electrum.
A mobile wallet functions the same way as a web wallet but can be used from a mobile phone. They appear as mobile phone applications and are used to store and facilitate Bitcoin transactions. Due to the multi-functionality and convenience of a mobile phone, users can now use their mobile phones to make transactions using Bitcoin through QR code and other methods.
Some popular mobile wallets include Bitcoin Wallet, Hive Android, Trust wallet, and Mycelium Bitcoin Wallet. These wallets are typically available in the Android and iOS formats. An unfortunate thing about mobile wallets is that hundreds, if not thousands of fake mobile wallets are out there.
Some pose an unintended but significant risk to user security, while others are Malware specifically designed to steal user’s cryptocurrency.
Web wallets are another popular way to store your cryptocurrency. It involves storing your private key online and accessing it from any device which has internet connectivity. While this is a convenient way to store cryptocurrency, it comes with some danger. Your private key is stored online and may be accessible to hackers. Therefore, you must exercise some caution when storing your Bitcoin on a web wallet.
Some popular web wallets also double as exchange platforms. Some examples include Coinbase, Binance, and Gemini.
Hardware wallets are the safest way to secure your crypto assets. As the name suggests, these are physical devices used to store Bitcoin. They are connected to a computer, usually through a USB port when in use.
They have several advantages over other forms of Bitcoin storage. These include their high level of security, immunity to virus attacks, and the fact that the device has to be physically withdrawn from you before your Bitcoin can be stolen.
However, hardware wallets are not free, unlike the other types of Bitcoin wallets, and can often be purchased for between $100 to $200.
The paper wallet took the idea of a physical Bitcoin wallet to the next step. A paper wallet is a document that contains a public address for receiving Bitcoin and a private key that allows you to send Bitcoin. These are typically printed in the form of a QR code.
This code can be scanned and added to a software wallet to make a transaction. These codes can be generated by several services such as BitAddress or Bitcoinpaperwallet, which creates a random Bitcoin address with its private key. The main advantage of using a paper wallet is that it is completely offline and cannot be hacked.
However, users need to take precautions while using or creating a paper wallet. Some of the practices to ensure the safety of your paper wallet is:
- Firstly, always ensure the Bitcoin paper wallet service you are using is trusted and fully vetted.
- Ensure no one is monitoring your system through the use of spyware.
- Once you’ve set up the paper wallet, make sure you print it out with a printer not connected to the internet.
- Lastly, always protect your paper wallet. Seal it and keep it safe to protect it from water damage or general wear and tear.
Storing your Bitcoin in a bank
The thought of storing their Bitcoin in a centralized financial institution is enough to make any crypto enthusiast shiver. Still, it might just be the next step in securing crypto assets. Most banks refuse to deal with crypto assets for various reasons, such as anonymity, decentralization, etc. To combat that, a Bitcoin Crypto Bank has been launched.
The Bitcoin Crypto Bank is a private institution that accepts Bitcoin deposits to add further security to the crypto work. It claims to be secure, risk-free and certified for profitable investments. While all the claims cannot be proven, the novelty of a Bitcoin bank appeals to certain investors.
This is another novelty idea, though not a very popular one. It involves preloading a physical item such as an electronic card or coin with a certain amount of Bitcoin and storing private keys under a tamper-resistant seal, which renders it unusable once it has been tampered with.
This allows users to store their cryptocurrency assets offline and is more durable than paper wallets. As pleasant as the idea sounds, it still behind other wallets for several reasons, such as theft or damage.
In conclusion, bitcoin wallets are the best way to store your digital assets. However, users should be cautious because of the rampant fraud and a large number of Malware currently operating on the crypto market.
Check every service carefully and vet them thoroughly before you even consider securing your assets in their platform.