A Bitcoin Wallet is a software that stores bitcoin. The wallet works just like your internet banking account. It is responsible for making all transactions like sending and receiving bitcoins, paying bills, etc. Bitcoin wallet stores a set of keys which are Public Keys and Private Keys. The private key should be secured and kept privately. It will be used to confirm you own the public key. If you lose the private key, you will lose the money in your wallet.
Every wallet has an address which is what will be given to one who wants to transfer bitcoin. Your wallet can exist either online or on your device. The wallet address comes in this format, “1A1nQ1eS5QGefi2DMPTfTL5MLmv7DivfNa” and has to be reviewed properly before making transfer to it. Every letter or figure found there is very important and should not be cancelled.
TYPES OF BITCOIN WALLETS
There are several types of bitcoin wallets to choose from as they all have their distinct features. All bitcoin wallets must follow the established Bitcoin protocol so they can all be used to send and receive funds regardless of their specific implementation.
The main categories of bitcoin wallets are Web Wallet, Desktop Wallet, Mobile Wallet and Hardware Wallet.
With web wallets, you can perform bitcoin transactions (store, send, etc) with your web browser on your phone or PC. It is hosted by a provider that ensures the security of your bitcoin wallet. You need to carefully make a good selection of the web wallet you will be making use of since it stores your private keys online. If your web wallet is not properly secured by the provider, they may gain access to your private keys and steal your bitcoins.
Web wallets are mostly preferred by people because there won’t be a case whereby you make a mistake of deleting your wallet from your computer and finally losing your bitcoins. At the same time, web wallet is not considered to be hundred percent secure because a third party has access to your funds. If they face an attack, you bear the loss with them. So it is advisable not to store large amount of bitcoins with them except you trust them.
Desktop Wallets are installed on your computer. You are provided with complete control of your wallet. Your private keys are stored on your computer. Desktop wallet is considered to be secured than web wallet since your private keys are stored on your computer and not with a third party. Some known desktop wallets are MultiBit, Armory, Hive OS X, Bitcoin Core and Electrum.
Mobile Wallets does the same job desktop wallet does. It is installed on your android or ios device. The app stores your private keys and enables you to make transactions directly from your phone. It quickly does the transaction of small amount of bitcoins by scanning QR codes. I still don’t see this type of wallet offering great security because one can access your phone, or your phone can get lost or stolen except if you protect your device by setting up a strong password, finger print or two factor authentication, which ever that is applicable. There are malwares that are developed by hackers, posing as bitcoin wallets but with the aim to hack your wallet and it’s vital details. So, be careful when choosing the right mobile bitcoin wallet.
The hardware wallet is a physical device that stores your bitcoin. The hardware wallet is plugged to your computer through a USB port. Private keys are stored safely in a hardware wallet and are never exposed even while connected to the internet. It is the most secure bitcoin wallet to store bitcoins of any amount. There have been no verifiable incidents of money being stolen from a hardware wallet. Hardware wallets are protected from computer viruses. The hardware wallets devices cost between the range of $100-$200.
It is very important to keep your bitcoin wallet safe as it is the target of hackers. Some security measures to observe includes encrypting your wallet with a strong password and also by storing your bitcoins offline. Ensure you backup your wallet on your device frequently because problems may occur with your device later which will cause loss of your bitcoins.
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