An introduction to the Bitcoin wallet
The Bitcoin wallet refers to a software program for storing this cryptocurrency. Bitcoins do not have physical existence but using a private key you can view your balance in this wallet. The Bitcoin wallet is required for receiving and sending Bitcoins and for storing these. You can choose from a variety of wallet types like desktop wallet, web wallet, mobile wallet, online wallet, etc. The wallet is a must for trading Bitcoins; it is comparable to any regular wallet but instead of storing physical coins it stores information like the private key.
Types of Bitcoin wallets:
- Desktop wallet: This can be set up on your computer and it offers users complete control. Desktop wallets are addresses where you can send Bitcoins and receive Bitcoins; users can store their private keys. For instance, Electrum, Bitcoin Core, and MultiBit.
- Web wallet: Using a web wallet, you can get access to your Bitcoins from anywhere, on mobile devices and web browsers. However, since these are connected to the Internet, you need to choose them carefully. Else, your private keys which are online can be exposed to security threats and hacks. Blockchain and Coinbase are well-known Bitcoin web wallet providers.
- Mobile wallet: This is similar to the desktop wallet and facilitate payments in stores through “touch-to-pay and NFC of QR codes. Examples are Mycelium, Hive Android, and Bitcoin Wallet. Since there is evidence of malware that pose as Bitcoin wallets, one must be cautious when choosing one.
- Hardware wallet: This is of course the safest types of Bitcoin wallet since it stores them on physical devices which can be plugged into computer via USB ports. It is immune to virus threats and you will find rare instances of Bitcoin thefts through hardware Bitcoin wallets. These are never free, costing between $100 and $200.
Things to remember for wallet security:
You need to make sure your Bitcoin wallet is safe as these turn out to be very high-value targets. This is why you need to choose a robust password that is hard-to-crack and preferably opt for a cold storage. Moreover, you should back up the mobile and desktop wallets often since any technical issues with the mining software can erase your assets. Check out the best wallet bitcoin comparison results to learn more about the best bitcoin wallet for you and to get started with a safe wallet to conduct crypto trades on your platform.
Bitcoin wallets can be custodial and non-custodial in nature. Custodial wallets will store user’s private keys in an exchange. So, a third party has complete control over user funds and you, as the holder, can only send or receive Bitcoins. The third party will provide backups for your wallet in case you cannot recall your login details. It is also subject to security provisions implemented by a third party. This may lessen your responsibilities but there are risks of the seed phrase being exposed in case this third party gets hacked. Non-custodial wallets, on the other hand, offer complete control to users over their Bitcoins and their private keys. So, the user is free to initiate transfers, responsible for wallet security, and must protect the seed phrase that can be used for retrieving the wallet if the keys get compromised or lost.
When you wish to make quick transactions frequently, but not keen to take up responsibility for wallet security or the seed phrase, you should opt for a custodial hot wallet. A smart and thoughtful Bitcoin user is one who will choose a wallet that conforms to his needs.