Bitcoin is a virtual currency that is created, stored and transferred through digital transactions on the blockchain. Bitcoin users send and receive money using Bitcoin wallets, which are digital wallets that store a user’s Bitcoin balance and allow them to make and receive payments. There are different types of wallets available for users, such as hardware wallets, paper wallets, mobile wallets, desktop wallets, and web wallets. These wallets have their own advantages and disadvantages and it is important for users to understand which wallet is best for them. Bitcoin is created through a process called ‘mining’, where computers solve complex mathematical problems to create new coins.
How Does Bitcoin Work?
Bitcoin is a virtual currency that is created, stored, and transferred through digital transactions on the blockchain. Bitcoin transactions are powered by a distributed ledger, known as the blockchain, which is stored on computers all over the world. Bitcoin users send and receive money using Bitcoin wallets, which are digital wallets that store the user’s Bitcoin balance and allow them to make and receive payments.
Bitcoin is created through a process called ‘mining’, where computers solve complex mathematical problems in order to create new coins. The process of mining requires a lot of computing power, and miners are sometimes rewarded with Bitcoin for their efforts.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is a digital wallet that is used to store and transact in different cryptocurrencies. The crypto wallet doesn’t exactly “store” the currency as real-world wallets do. Instead, it stores public and private keys which help in sending and receiving money. Bitcoin owners save bitcoins in either an online wallet or a paper wallet which are similar to a physical wallet. Wallet holds keys to each bitcoin, securing them and preventing any fraud.
What are Public and Private Keys?
Public and private keys are what make up a Bitcoin wallet. The public key is the address to which others can send you the money, while the private key is that which you will use to send money to anyone. It is important that ONLY you know your private key; otherwise anyone who knows your private key can steal your money. You should not lose or reveal your private key come what may. Otherwise, losing your private key is similar to losing your money. You should use at least two different techniques to save and store your private keys.
Types of Bitcoin Wallets
When it comes to storing bitcoin, there are several different types of wallets available. These include hardware wallets, paper wallets, mobile wallets, desktop wallets, and web wallets.
Hardware Wallets
A hardware wallet is a physical electronic device to secure bitcoins. The hardware wallet must be connected to your computer or smartphone, before bitcoins may be spent. The three most popular and best Bitcoin hardware wallets are Ledger Nano S, TREZOR, and KeepKey. Hardware wallets are the preferred choice if large amounts of bitcoins need to be stored and are secure, reliable, and convenient. Bitcoin hardware wallets isolate private keys from internet-connected devices that are vulnerable to hackers.
Paper Wallets
A paper wallet is a piece of paper on which the public address and private address are printed, usually in the form of a QR code. Public address is used to receive bitcoins, and the private address is used to send or transfer the bitcoins stored at that address. The paper wallet should be used securely and not revealed or lost.
Mobile, Desktop and Web Wallets
These are software apps available on mobile phones, desktops, laptops or websites that allow bitcoin transactions. Mobile wallets are convenient as they allow making payments directly from your phone, but they are very susceptible to hacker attacks and also if the mobile is lost, others can access the wallet. Desktop and web wallets are also available, but they are not as secure as hardware wallets.
Hot Wallets
Hot wallets are Bitcoin wallets that run on internet connected devices like a computer, mobile phone, or tablet. Private keys are secret codes that hot wallets generate on an internet connected device. As such, it is not recommended to store a large amount of bitcoins in a hot wallet.
Opening a Bitcoin Wallet Account
We can go to sites like coinbase.org and sign up with our name, email id and phone number. Opening a wallet account is like opening a bank account where we can send, receive and store money in bitcoins. In Coinbase, we can create multiple wallets which is a great way to organize the record of your expenses and savings. By default, there are following wallets in Coinbase, namely, Bitcoin BTH wallet, Bitcoin Cash BCH wallet, Ethereum ETH Wallet and Litecoin LTC Wallet. You have a wallet in US dollars as well so that you can buy and sell the cryptocurrencies using US dollars.
Final Thoughts
Bitcoin is a virtual currency that is created, stored, and transferred through digital transactions on the blockchain. Bitcoin transactions are powered by a distributed ledger, known as the blockchain, which is stored on computers all over the world. Bitcoin users send and receive money using Bitcoin wallets, which are digital wallets that store the user’s Bitcoin balance and allow them to make and receive payments. There are multiple types of wallets available for users to store their Bitcoin, such as hardware wallets, paper wallets, mobile wallets, desktop wallets, and web wallets. Each of these wallets has their own advantages and disadvantages, and it is important for users to understand which wallet is best for them.