Why You Need a Bitcoin Wallet
Bitcoin, unlike most traditional currencies, is a digital currency. Thus, the approach to this kind of currency is completely different, particularly when it comes to acquiring and storing. Since Bitcoin doesn’t exist in any physical shape or form, they can’t technically be stored anywhere. Instead, it’s the private keys used to access your public Bitcoin address which represents a value specified in a transaction. A combination of the recipient’s public key and your private key is what makes a Bitcoin transaction possible. So where’s your wallet? We will help you set one up.
There are several different types of Bitcoin wallets. Depending on priorities of use, you will choose the one that is right for you.
Types of Wallets
Essentially, a crypto wallet is a cross between a bank account and a mailbox for cryptocurrency. It is crucial that you become comfortable and familiar with how your wallet functions, because this is how you save, protect and spend your Bitcoin. It’s also where you can see a record of all of your transactions. But a bitcoin wallet is, by its very nature, for cryptocurrency only.
A paper wallet is essentially a document which contains a public address used to receive Bitcoins and a private key, which allows you to spend or transfer Bitcoins stored at that address. These numbers translate to a QR-code, so that you can quickly scan them and add the keys to a software wallet for a transaction. You can easily generate a paper wallet at a Bitcoin ATM or through services like Bitcoinpaperwallet.com. This allows users to create a completely random Bitcoin address and a private key to it. The generated document can then be printed, and some services even offer a tamper-resistant design that is ready for use.
The main advantage of a paper wallet is that the keys are not stored digitally anywhere, which makes it completely immune to hacker attacks, malware that can log the user’s keystrokes and basically any form of digital theft. However, some precautions when creating a wallet still need to be taken. Obviously, before generating a paper wallet you need to make sure that no one is watching you do it. Rule out the risk of any spyware monitoring your activities. Furthermore, once the paper wallet is set up, the website code runs offline, which allows you to disconnect from the Internet before actually generating the keys. Finally, use a printer that is not connected to a network.
Moreover, it’s important to understand that you are printing valuable private information on a piece of paper. So, you need to take certain measures to protect that piece of paper. Keep it in a sealed plastic bag to protect it from water, damp and general wear and tear. Store it in a safe place, even a safe or safety deposit box.
For those actively using Bitcoins on a daily basis, paying for goods in shops or trading them face-to-face, a mobile BTC wallet is an essential tool. It runs as an app on your smartphone, storing your private keys and allowing you to pay for things directly from your phone. Moreover, some apps enable users to use their smartphones’ near-field communication feature, which means they can simply tap their phone against the reader, without having to provide any information at all.
Any full Bitcoin client requires access to the entire Blockchain ledger, which is constantly growing and requires several gigabytes of storage. Hence why, mobile wallets take advantage of simplified payment verification (SPV) technology. They only work with very small subsets of the Blockchain, relying on trusted nodes in the Bitcoin network to ensure that they have the correct information.
Despite being a convenient on-the-go solution for Bitcoin storage, mobile wallets are very prone to hacker attacks. Moreover, you can lose control of your wallet if someone simply gains access to your mobile device. There’s a big variety of Bitcoin wallet apps for devices both Android and Apple.
Web wallets store your private keys on a server of a company providing such services. The server is constantly online and controlled by someone else. Different services offer different features, with some of them linking to mobile and desktop wallets, replicating your addresses across the devices you own.
Much like mobile wallets, e-wallets enable their users to access their funds on-the-go from any device connected to the Internet. But unless implemented correctly, the organizations running the website might gain access to your private keys, thus getting total control of your funds. Moreover, some e-wallets are operating on the base of exchanges, and there have been instances of exchanges shutting down and running away with their users’ funds.
Desktop wallets store private keys on your hard drive. By definition, they are more secure than online and mobile wallets, as they don’t rely on third parties for their data and are harder to steal. Still connected to the Internet, makes them inherently insecure. However, desktop wallets are a great solution for those trading small amount of Bitcoin from their computers.
There is a variety of different options of desktop wallets that cater for different needs. Some focus on security, while others focus on anonymity or other aspects. You can research any of these, and figure out which is right for your purposes.
A hardware wallet is a rather unique type of Bitcoin wallet that stores the user’s private keys in a secure hardware device. It is the most secure way of storing any amount of Bitcoins, there have been no verifiable incidents of money being stolen from a hardware wallet. Unlike paper wallets, which must be imported to software at some point, hardware wallets can be used securely and interactively. Moreover, they are immune to computer viruses, the funds stored cannot be transferred out of the device in plaintext and in most instances their software is open source.
Some hardware wallets even have screens, which add another layer of security, as they can be used to verify and display important wallet details. For instance, a screen can be used to generate a recovery phrase and to confirm the amount and address of the payment you wish to make. So, as long as you invest in an authentic device made by a trustworthy and competent manufacturer with a good reputation, your funds will be safe and secure. These gadgets cost around $100.
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