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A wallet in the context of bitcoins lets you store the bitcoins that you purchase. There is no way you can purchase or sell bitcoins without having a wallet. You can figure out the price of the bitcoins by finding out the conversion of usd to btc. There are different types of Bitcoin wallets with their own advantages and disadvantages. This article explains What is a Bitcoin wallet, Types Of  BitCoin Wallets,Which Bitcoin Wallet Should You Use?

What is a Bitcoin wallet?

A  wallet is an object where we keep currency/cash.  Similarly, in the world of cryptocurrencies, we need wallets to hold our cryptocurrencies. Bitcoin is one of the most popular and widely used cryptocurrencies, and it too requires a wallet to hold it.

Address

  • If you want to receive an email you need a unique email address.
  • If you want to receive Bitcoins you need a unique personal address. Just like your email address where anyone can send emails here anyone can send Bitcoins to it.

Accessing

  • If you want to access your email you go to your email program like Gmail or Outlook.
  • To access your Bitcoins you need a program which is called Bitcoin Client.

Password

  • For accessing emails on the email program you need to enter your email address and password.
  • When accessing your Bitcoin program you will need to enter your Bitcoin Address and “private key”.

Every Bitcoin address has only 1 matching private key. But each private key can be used for multiple addresses.  Just like each email address has only 1 password that opens it. But you can use the same password for multiple email addresses. It’s crucial that you keep the combination of your Bitcoin address and private key safe. Exactly like you’d guard your combination of email address and password

Some people write Bitcoin address and private key safe down on a piece of paper and hide it away, others store it in an encrypted file on their computer, there are also dedicated websites that hold your private and public keys for you. Any place that these 2 pieces of information are stored at is called a Bitcoin Wallet. So the place where you have both your bitcoin address to receive bitcoins and the private key to send/spend bitcoins is called a Bitcoin wallet. In an even more simplified way, a wallet is a digital file which stores your bitcoins.

Types Of  BitCoin Wallets

  1. Hardware wallet– These kinds of wallets are available in the form of a USB like hardware. What you do is, store your bitcoins in the hardware. You have to buy the hardware. This hardware has a screen and a few buttons and has the private key stored in it. Whenever you try to make a transaction, you have to plug into your device in order to provide the private key. In order to authenticate, you have to press the button on the device. When that is done, you can complete the transaction. Since the buttons are only in your control, there are no chances of it being hacked. You get a unique key that you have to enter using the buttons every time you want to access your bitcoins. Since only you know the key, no one else can have an access to your bitcoins. These wallets have their own screen and some buttons using which you can operate them. Examples of Hardware Wallets are Keepkey, Trezor, Ledger Nano S
  2. Web Bitcoin Wallets (aka Hot/Online/Hosted Wallets) Wallets which are basically web services and are accessible through web/internet-based browsers such as Google Chrome, Firefox, and IE are called web-based Bitcoin wallets. The private keys are held online in these kinds of wallets. They are accessible via an internet address such as https://xyz.com. An online wallet is also called a software wallet. When you have an online wallet, you get a password key for your wallet. Every time you sign in, you have to type in the key and that is how you can access your bitcoins. You should make sure that you have your private key memorized so that you don’t lose it. Once you lose it, there is no way you can recover it. And your stored bitcoins become inaccessible for you. Examples of Online wallets are CoinBase, Xapo, Coinimal
  3. Desktop Bitcoin Wallets Desktop wallets are Bitcoin wallets which are installable on different desktops, and as per the user’s needs, are compatible with Windows, Mac, and Linux. Electrum, Bitcoin Core, Bitcoin Armory, mSigna,Green Address. Electrum is the most popular desktop Bitcoin wallet.
  4. Mobile Wallets: Bitcoin wallet applications which are installable on mobile phones are called mobile wallets. For each mobile operating system, such as iOS, Android, Windows, and Blackberry, compatible wallets are available. India’s Bitcoin space has Zebpay, Unocoin, and Coinsecure as the leading platforms.
    • Android Wallets:
      • MyCelium
      • Jaxx
      • Copay.io
    • iOS Wallets:
      • Breadwallet
      • CoPay
      • AirBitz
  5. Paper Bitcoin Wallets (aka Cold Storage Wallet)  Paper wallets are a piece of paper with a public address and the private address printed on them. You can use the public address to send any amount of bitcoins. You can then save the piece of paper as it also contains the private key which can be used to transfer/spend bitcoins, or sweep the Bitcoin paper wallet completely to another wallet.Since the keys are offline, printed and secured by the owner, there is no threat of any electronic damage to bitcoins unless the printed keys are lost.

The YouTube video below discusses the TOP 6 CRYPTOCURRENCY WALLETS.

The image below shows how does the Bitcoin economy works

How does bitcoin economy work and bitcoin wallet

How does bitcoin economy work

Which Bitcoin Wallet Should You Use?

Which Bitcoin Wallet Should You Use? It depends. The type of wallet you should use really depends on Are the bitcoins you possess for your savings/investment, or are they for daily transactions?

  • your level of activity
  • level of security with which you want to handle your bitcoins.
  • It also depends on how frequently you use your funds and how much you want to store on any particular wallet.

I only use web wallets to keep small amounts of bitcoins, similar to a wallet in my pocket for daily transactions.

Wallet Type Security Ease of Use Frequency of Activity
Web Bitcoin Wallet Low High High
Hardware Bitcoin Wallets High Low Low
Desktop Wallet Medium Medium Medium

 

Which wallets do you prefer to use? Have you used any on this list? Let us know in the comments below!

These wallets not only help you store the digital money and bitcoins, the private key that you have also gives you the liberty to make purchases of the bitcoins by exploring marketplaces.

Related Articles:

Understanding Bitcoin: What is Bitcoin,How it works,How to buy Bitcoins

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