A bitcoin wallet or digital wallet, is a program that allows you to send and receive bitcoin to your Public bitcoin address.
Bitcoin wallets store your Private and Public keys that interact with various different blockchains that enables users to both receive and send cryptocurrencies and tokens anywhere around the world.
Types of Bitcoin Wallets:
- Online/Cloud Wallet
- Desktop Wallet
- Mobile Wallet
- Hardware/Cold-storage Wallet
- Paper Wallet
- Online/Cloud Wallet: Online wallets run on the cloud and are accessible from any computing device in any location.
Online wallets are the most popular type of bitcoin used today so we’re going to be concentrating on this type of wallet for now (but I also give a short description of the other types).
Online bitcoin wallets comprise of two elements – a Public address, and a Private Key.
The best way to understand an online bitcoin wallet is by comparing it to traditional email. Once you’ve set up an email address, you need some kind of software to allow you to send and receive emails to that new address. This software may be an app on your phone, it may be an app on your laptop, or it may even be an app online – that you log into.
You have to enter the username and password of your email account into the email app or website – and that’s how the internet knows that it’s really you that wants to send and receive emails to that address.
In order to for someone to send you an email, you have to give them your email address.
But, just because someone knows your email address – that doesn’t allow them to send email from that address does it? If they could, that would be bad because then they can send an email from your account pretending to be you – and cause all kinds of problems.
In order to be allowed to send email from a particular email address, you have to know the password of that email account.
This is very similar to how online bitcoin wallets work.
Every online bitcoin account has two elements to it. One of them is called your Public address (which is kind of like your email address), and the other one is called Private Key (which is kind of like the password to your email account). So just like your email, you can give anyone your Public bitcoin address; and then anyone anywhere in the world can send you some bitcoin – they don’t need to know anything about you – all they need to know is the Public address, and they can send money to you.
Now your bitcoin Private Key on the other hand is one thing you must protect. It’s called Private Key for a reason. Because you should never reveal it to anyone!
If someone gets your bitcoin wallet Private Key, they can steal all of your bitcoins by sending them somewhere else.
And just like emails, once a bitcoin transaction has been sent, it’s a one-way trip! The only way to get it back would be for that person to send it back to you voluntarily (and we know that’s highly unlikely to happen).
- Desktop Wallet: Desktop wallets are downloaded and installed on a PC or laptop. They are only accessible from the single computer in which they are downloaded. This kind of wallet can only be accessed via your desktop/laptop computer, and is susceptible to a virus attack.
- Mobile Wallet: Mobile wallets are downloaded on your mobile device via PlayStore or AppStore, and are useful because they can be used anywhere including retail stores. Mobile wallets are usually much smaller and simpler than desktop wallets.
- Hardware or Cold-storage Wallet: Hardware wallets differ from software wallets in that they store a user’s private keys on a hardware device like a USB. Although hardware wallets make transactions online, they are stored offline which delivers increased security.
The advantage of Hardware wallets is that they are the most secure type on wallet in general. The reason why you’d want a cold-storage or hardware wallet is because you want to store your cryptocurrencies safely.
If you have a really large amount of bitcoin or Altcoin that you don’t ever want to lose, then a Hardware wallet is the option you should go for.
- Paper Wallet: Paper wallets are easy to use and provide a very high level of security. While the term paper wallet can simply refer to a physical copy or printout of your public and private keys, it can also refer to a piece of software that is used to securely generate a pair of keys which are then printed.
While paper wallets can be pretty safe, they are however quite easy to lose (i.e., easy for it to get missing).
Safety Recommendations For Your Bitcoin Or Cryptocurrency Wallets:
- Always back-up your wallet: No matter what type of wallet you use, always back it up (use a mnemonics or 2-Factor authentication for extra security).
- Update Software: Keep your software up to date so that you have the latest security enhancements available. You should regularly update not only your wallet software but also the software on your computer or mobile.
- Use different types of wallets: If you have a large amount of bitcoin, it’ll be advisable to diversify the types of wallets you use. Spread your cryptocurrency asset among two or three types of wallets just to reduce the magnitude of any loss or theft you may incur in the future (don’t put all your eggs in one basket)!
What Is A Bitcoin Address?
A bitcoin address, is a Public address or key that directs people to your wallet (just like your email address can be used to receive an email into your email account, a bitcoin address is used to receive bitcoin into a bitcoin wallet).
Bitcoin addresses are made up of
and always starts with the number ‘1’.