Bitcoin Wallet : What is it & how does it work

Bitcoin Wallet

I don’t have to start this post with “Bitcoin is a digital currency and blah blah blah.” You all know what Bitcoin is and that is why intrigued to know about Bitcoin wallet. Instead, I’ll start with…

The approach to this sort of currency is entirely different when compared to the traditional currency acquiring and storing. Since Bitcoins are physical money, they kind of can’t technically be stored in our usual purses or wallets. But the private keys that are used to access your Bitcoin account and sign for transactions are what to be needed to keep safe and sound. A combination of your private key and the receiver’s public key is what needed to complete the Bitcoin transactions.

Now, when it comes to Bitcoin wallets, there are various types of Bitcoin wallets. Depending on the kind of requirement, security, convenience, and accessibility, you can choose one of the below.

Paper

As the name suggests, a paper wallet is typically a document that contains a public address which can be utilized to receive Bitcoins along with a private key that lets you transfer/sell or spend Bitcoins which are stored in that address. Usually printed in the form of QR-codes so that the users can do their transactions by quickly scanning the codes and add the key to a software wallet.

There are several services that generate paper wallets such as Bitcoinpaperwallet which lets people create an entirely random Bitcoin address along with a private key to it. Now, the users can take a print out of the generated paper and also they can choose some additional services such as a tamper-resistant design or getting holographic labels.

The main benefit of this paper wallet is that there will be no trace of keys digitally anywhere ultimately making it entirely resilient to eavesdroppers, a virus which can trace the user’s keystrokes and basically any type of online theft. It doesn’t mean that you can completely be relaxed. There still are some cautions that you need to take care even for the paper wallet.

How to secure it?

→ Of course, before or while generating a paper wallet, ensure there is no one literally watching you doing it.
→ In order to mitigate the chances of any spyware watching your activities, make sure you do this on a fresh or clean operating system, like Ubuntu, running from a DVD or a memory stick.
→ Also, once you are done setting up the paper wallet, the website code runs even in offline mode. So you can disconnect the system you are using from the Wi-Fi/internet before you actually start generating the key.
→ Last thing, utilize a printer that doesn’t need internet to work.
→ Since you are printing so much valuable information on a paper, make sure the paper is well sealed to protect it from any physical damage such as laminating it and storing in a secret safe or deposit box.

Mobile

For users who actively trade Bitcoin on a regular basis, a mobile Bitcoin wallet comes very handy. It runs as a mobile app that stores your private keys to let you purchase stuff directly from your smartphone. In addition, some applications even let users utilize their phones’ NFC (Near-field communication) feature so that users can simply tap their smartphone against the reader and that’s it. They don’t have to give any sort of information at all.

Even though this sort of thing provides on-the-move people a great solution, mobile wallets are extremely vulnerable when it comes to security. Not necessarily someone has to hack your mobile. Even if you lose your smartphone, people can easily get to access your wallet. There is a hell of a lot of mobile apps exclusively for this.

Web

Private keys can be stored in web wallets on a serve of any business who provides such services. The server will be 24/7 online and will be monitored by someone else. There are various kinds of services with different types of features. Some of them will link to mobile wallets while some of them to desktop which replicate your address across the smart electronics you have.

Just as mobile wallets, e-wallets also let people access their accounts while on-the-move from any smart device which has internet connection. But make sure whatever company’s web wallets you are using are verified and have a good reputation in the market otherwise, they will and easily can gain access to your private keys and get complete control of your funds.

Desktop

These wallets can be easily downloaded on your systems which stores your private keys on your hard drive. When compared to mobile and online, desktop wallets are more secure and safe since they do not depend on any type of 3rd-parties for their data and hence are extremely complex to steal. However, they still connected to the network which makes it highly safe. But desktop wallets are an excellent solution for users who trade very little amount of Bitcoin from their systems.

Hardware

This is a unique kind of wallet which stores people’s private keys in a sound and safe hardware device. It is one of the safest ways to store your Bitcoins, regardless of the amount as there were no confirmable incidents of Bitcoins/currency being stolen from a hardware wallet. When compared to paper wallets which have to be imported to software eventually, hardware wallets are pretty much safe. Also, there are invulnerable to hacks and hackers as the funds stored can’t be taken or transferred out of the device in plaintext.

Moreover, some hardware wallets even have screens that increase the safety and security as they can be utilized to check and show essential wallet details. For example, a screen can be utilized to produce a backup phrase and affirm the money and address of the payment you want to do. In this way, as long as you put resources into a legitimate gadget made by a reliable maker with a decent reputation, your assets will be protected and secure.

Bank

Since many countries across the globe have just started to adapting this whole Bitcoin thing, and especially, the government is still not completely considering Bitcoin as a viable currency, even banks are not safe and in fact, they don’t accept Bitcoin as any form of currency.

Are Bitcoin wallets safe?

That completely depends on the option and format you have chosen, and how well you utilize them. However, the hardware wallet is the safest of all as there will be no data available online to hack. But in any case you lose your hardware wallet, that’s it. Your Bitcoins are gone unless you have a backup that you can rely on.

Various Bitcoin investors opt for a combination of approach. They hold on to a long-term BTC amount outside of the digital world while keeping some amount as a spending thing for the safe side in their mobile accounts. But whatever option you choose, please be cautious. Take recovery of everything and do not trust people(Other than your immediate family).

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