Whether you own physical or digital coins, you should keep them somewhere. This is applied to Bitcoin. Although Bitcoin is a digital coin, you need a wallet to save it. Wallets are crucial if you wanna invest in Bitcoin or use it in buying services and goods.
Therefore, when you decide to use Bitcoin in your daily life, you should look for a good Bitcoin wallet. Fortunately, Bitcoin wallets have many types and are easy and are easy to use. They work like physical wallets where you can hold your cryptocurrencies safely and no one can mess with your wallet. Whether you bought or mined crypto coins, you have to store them in a wallet.
What Is a Bitcoin Wallet?
In simple words, a Bitcoin wallet is a digital wallet. You use it to keep your cryptocurrencies like Bitcoin, Cardano, Link chain, Ethereum or XRP.
Actually, the CEO of Onchain Custodian, Alexandre Kech, defines a crypto wallet (including a Bitcoin wallet) as a digital wallet that helps you store the encryption material and give access to a Bitcoin public address. It also makes you capable of sending and receiving transactions.
Additionally, crypto wallets are secured with a key. This key is private and no one can access the wallet without it. In this way, only you as well as anyone who has this key can open your Bitcoin wallet.
This ensures that your crypto wallet is totally secured and no one can reach your coins.
You can use crypto wallets to store, send and receive Bitcoin as well as other digital coins ( like Eth, Ada, Xrp, Link, Dot, etc…) and tokens.
Some Bitcoin wallets support basic transactions from a wallet to another while others have more features, like staking crypto coins, having an access to apps which are blockchain-based decentralized applications like Pancakeswap, Uni swap, etc…
How Does a Bitcoin Wallet Work?
A bitcoin wallet mainly works blockchain( secure digital ledger), called blockchain, so using your Bitcoin wallet is as easy as the wallet you use for your physical money.
You can also look to your crypto wallet as an email. To send an email, you open your email using the email and password, type the email of the one you wanna send the email to, write your message and click send.
To use your bitcoin wallet, you open your wallet by your private key for reach your cryptocurrencies coins, type the address of the one you’re sending him money and click send. This is super easy.
In crypto wallets, the private key is the secret code that only the owner of the wallet has( same concept as the password of email), and the public address is an identifier that points to a particular ledger wallet( same as the email).
You have to make sure that your key is saved in a secured place where only you can reach it. If someone knows this key, he can open your wallet and steal your coins. Additionally, you must not lose it, as losing your key means losing access to your crypto wallet and losing your coins.
It is important to know that Bitcoin wallets differ from other wallets by being decentralized and cryptographically secured. This means that these wallets don’t have central customer support whom you can call in case you lost your password. There is no way to contact anyone to prove that you won this wallet.
In fact, recent statistics showed that 20% of all Bitcoin which is now worth billions of dollars are lost in digital wallets because their owners can’t access these wallets and can’t contact anyone to reset their key or prove their ownership.
Why is Bitcoin wallet important?
Crypto coins are not technically stored in your Bitcoin wallet like you store your cash in your physical wallet. Your holdings are actually found on the blockchain, and you can access them using your private key.
This private key proves that you own these digital coins and allow you to use them in any kind of transaction.
Therefore, you should keep in mind a few important things:
- Keep your private keys in a safe place where no one can reach them.
- Save your key in a place you can easily find, or write it on paper and put it in a safe place.
- Put your hardware wallet (if you have one) in a safe place to protect it from being stolen or deteriorated by water, humidity, etc…
- Use a trusted wallet like Coinbase, Safepal, Electrum, Exodus, Trust wallet, etc…
Types of Bitcoin Wallet
Again, bitcoin wallets are similar to physical wallets as both have different styles with different features so that the user can choose what meets his needs. Each has a certain way to access and protect against hackers.
1- Mobile Bitcoin Wallets
Mobile wallets are the most popular ones among crypto owners. These bitcoin wallets are applications installed on your mobile and tablets.
Using such wallets is very easy. You can send money to a recipient by putting his address. There are a lot of Bitcoin wallets like Safepal, Trust wallet, Mycelium, Edge, etc…
These crypto wallets are amazing because of their portability and convenience; however, they are not the most secured ones among wallets. People with such wallets are in danger of losing their wallets if the wallet itself gets hacked, or if someone steals their device as he will have access to their wallets and can take all their coins.
2- Web Bitcoin Wallets
Web Bitcoin wallets like Coinbase and Blockchain.com are web-based wallets that hold your coins through an online third party.
You just need a device with a browser and an internet connection to make transactions using these wallets. They allow you to store and trade coins.
Although they are convenient and easy to use, there is still a high risk of getting hacked as they are connected to the internet.
Although hacking is a rare situation and you will be replenished through insurance, no one would like to take such a risk. Moreover, exchanges may suddenly shut down on such platforms, and you’ll lose all the coins which you have in your web wallets.
3- Desktop Bitcoin Wallets
This is another type of crypto wallet where you download a program on your computer or laptop and store your coins on your hard drive
Atomic Wallet, Electrum, Exodus, are a few examples of this kind of wallet.
What is special here is that you won’t rely on any third party to help you store your money. This is an advantage related to security which web and mobile apps don’t have.
However, there is still a small risk of being hacked because you connect your computer to the internet.
4- Hardware Bitcoin Wallets
Unlike the other mentioned digital wallets, Hardware wallets are physical devices. They are small devices. which you are not. connected to the internet like a USB drive. In order to make transactions, you have to connect your wallet to the internet. Some hardware wallets are connected directly, while others need another device for internet connectivity.
These kinds of wallets are more secure than others because you need to type your password to complete the connection. However, you may lock your wallet if you forget this password.
There are two types of wallets:
- Hot wallets: These are the wallets which are connected to the internet.
- Cold wallets: These are the crypto wallets which are not. connected to the Internet.
Hardware wallets are usually more compatible for those who are investing long-term, as they won’t open their wallets every day and don’t want to leave their coins on an exchange.
5- Paper Bitcoin Wallets
For using a paper bitcoin wallet, you have to print your key (usually it is a QR code) on a paper document. In this way, no hacker can ever access and steal the password online. However, this kind of wallet is rarely used these days because there is a big risk of losing the documents. Your private key can be destroyed, lost or even stolen.
Tips to choose the best Bitcoin Wallet
To choose the best bitcoin wallet, you have to keep in mind a few things like:
- Changing your crypto wallet at any time.
- Have more than one wallet.
- Have coins in more than one wallet at the same time.
- Keep your private key in a secured place.
How Do You Plan on Using Crypto?
People use crypto for different purposes. Some see it as a long-term investment to build wealth while others trade daily to get a daily income. There are also those who buy crypto coins to buy and sell products from stores that use crypto as a payment method. The way you wanna use crypto determines which kind of wallet is the best for you.
For example, hot storage wallets are better for people who need daily access to their wallets, while cold storage wallets are more secure for long-term investors.
Moreover, keep in mind that you have to pay certain fees if you want to trade or exchange coins from a wallet. to another.
- Research the Wallet’s Reputation
You can’t just choose any wallet to put your coins in before reading reviews about security, easiness, user experience, main features, etc…
You must also choose a wallet with advanced backup options. Again, make sure to keep your private key in a safe place as no one can reset it for you if you lose it.
Remember that your bitcoin wallet must meet your needs. If you are buying bitcoin for investing, cold wallets may be better for you. However, if you are a daily trader, you may need a mobile wallet or a web wallet so you can access your coins easily.