Bitcoin wallets: Everyone now would have known about cryptocurrencies, especially bitcoins. But as they are digital currencies, many of you will be doubting how to store those digital currencies composed of 0,s, and 1’s. With traditional currency, you will be using a physical wallet to store your money. Similarly, to save the bitcoins, a digital wallet will be used, composed of a combination of private keys and public keys. With a public key, a bitcoin user will receive bitcoins, and with a private key, a bitcoin user can send his bitcoins to a receiver.
A bitcoin wallet is used for sending and receiving bitcoins for the exchange of goods/services. It is always mandatory to safeguard private keys because, if you miss or forget your private key, the wallet’s entire bitcoins will be lost. To solve this issue, wallet backup options are there, where you will recover the lost private keys. The security of wallets differs from wallet to wallet. There are different types of wallets, and this section discusses those types in the following sections of the article.
There are two types of bitcoin wallets. They are:
- Hot storage wallets
- Cold storage wallets
- Hot storage wallets
These types of wallets are available online and always require an internet connection. Hot storage wallets are mostly preferred by all, as they are convenient. But as they are connected to the Internet, there may be security issues. The following are the types of hot storage wallets. They are:
- Web wallets
- Desktop wallets
- Multi-signature wallets
- Mobile wallets
In a web wallet, a bitcoin transaction takes place through a web browser, where the wallets are linked to an exchange or online bitcoin service provider. When you use a web wallet, all your bitcoins will be stored in the online service provider’s wallet. So, it is advised that only a small amount of bitcoins has to be stored in a web wallet.
But the web-wallets are very easy to use and very convenient, and some online providers even safeguard the private keys. But the pitfall is, if the online provider’s server is hacked, you too will lose your bitcoins stored in the online provider’s wallet. But this problem has been overcome by multi-signature solutions. To know more you can visit https://cfds-trader.com
The multi-signature wallets are used by most web wallets, where more than two keys will be used for security and safety concerns. Even if the online provider is hacked, the users will be holding backup keys, with which the wallet can be recovered.
The desktop wallets are software, which allows the user to download, wallet, and store in their desktop; therefore, the bitcoin owners will have full control over the coins as the private key is stored in their hardware. The Desktop wallets allow the user to download in two forms. In Full-node type, the entire blockchain will be downloaded, which requires more space and more time. In Light clients, the blockchains are synchronized instead of downloading the full wallet.
The desktop wallets are highly secured than web wallets. But as they are connected to the Internet, there is a possibility for a virus attack or malicious user attack.
For conveniently transacting bitcoins while moving around, mobile wallets can be used. But as they are not safe as mobile can be stolen or you may lose somewhere. So, always keep minimal bitcoins in a mobile wallet.
- Cold storage wallets
In this type, the private keys and public keys are generated offline. They are also called as offline wallets, as they do not need an internet connection. The following are the types of cold storage wallets. They are:
- Paper wallets
- Hardware wallets
There will be both public keys and private keys in a paper wallet that can be printed in any kind of paper by scanning a QR code. The keys can be printed using a paper wallet generator or by using a printer. But the desktop copy of the keys should be deleted immediately after printing for safety reasons. The printed keys must be kept in a secure place.
A hardware device will be connected to the service provider’s website to obtain the keys in this type. But the device can operate in offline mode. Thus they are very secure.
Thus this article has discussed various wallet types and the security levels of every wallet type. So, Start today with an appropriate wallet and start earning bitcoins.
HussaiN is a full-time professional blogger from India. He is passionate about content writing, Tech enthusiast & computer technologies. Apart from content writing on the internet, he likes reading various tech magazines and several other blogs on the internet.