Bitcoin has been the world’s most popular cryptocurrency for years, but you need your own bitcoin wallet to be able to buy, receive, and store. It is worth remembering that in terms of functionality, each cryptocurrency wallet is more like a bank account than a traditional wallet for fiat currencies. How does a bitcoin wallet work, what types of wallets are there, how to use it, and what should you remember when choosing a secure wallet for yourself? Electronic bitcoin wallet – principle of operation
Every cryptocurrency wallet, in practical terms, is an account where bitcoins (or other cryptocurrencies) are stored. The encryption key is a pair of two parts:
- a public key (also known as a public address) used to authenticate a specific bitcoin account and its contents. It is this key that is shared with other people if they send us bitcoin. More importantly, you can use a separate public key for each transaction;
- The private key used to authorize and encrypt transactions. In order not to lose access to your wallet, this key should never be shared with others, because without this key it is impossible to transact on the BTC stored in the wallet!
Currently, there are several types of cryptocurrency wallets, each with its own unique characteristics. The basic distribution is as follows:
- hot wallets – these are wallets that work on any device with Internet access;
- cold wallet – this group includes wallets that work offline without access to the network.
Cold wallets include a paper wallet (which is just a private key written on a piece of paper), and the hardware wallet is a separate device that must be connected to a computer or other device to perform any transactions on owned bitcoins. In hardware wallets, signature transactions take place in a closed environment, and each transaction must also be confirmed by manually entering a PIN code.
Hot wallets (online wallets) are divided into two:
- mobile wallets – that is, applications for Android or iOS devices. As a rule, each such application allows you to scan QR codes, which provides great ease of use, since you do not have to manually enter the private or public key each time.
- computer (desktop) wallets – each of such wallets is an application that must be installed on your computer. They can process one to several dozen cryptocurrencies, they also differ in interface, ease of use and security. Importantly, some of these types of wallets may require a large amount of data (counted in gigabytes) to download to the computer, since the entire block is downloaded and synchronization can take a long time;
- browser wallets – their owners log into such wallets through an ordinary web browser. Among the undoubted advantages of this solution is that you can access your BTC anywhere with Internet access. When choosing a browser wallet, special attention should be paid to the reliability of the platform operator in order to minimize the risk of losing bitcoin.
What is the best bitcoin wallet?
There is no clear answer to this question, nor to the question of where is the best place to set up a bitcoin wallet. This is because every bitcoin holder is different, has different needs and different approaches to security. However, it was generally accepted that you should use a cold wallet to store (save, invest) larger amounts of BTC, and for easy transfers or purchases, online browser wallets are definitely a better solution.
The decision to open a wallet on a particular internet platform or use a particular application for a computer should always be considered and never taken lightly, because the security of your bitcoins and the convenience of using them depend on it.
The article was written collaboratively. Coincher.com