Many are joining the cryptocurrency trading train. However, many are baffled that buying Bitcoin is not as easy as it seems. Apps need to be installed first before you can buy Bitcoin. One of the apps that you will need to buy Bitcoin is a digital wallet. This article is a bitcoin novice guide to the bitcoin wallet and its various types.
First of all, you need to learn what a cryptocurrency wallet is. It is actually different from a real wallet where money and other personal belongings are kept. A bitcoin wallet doesn’t actually contain any bitcoin. All 21 million coins issued by Bitcoin to date are stored on the blockchain and nowhere else. A wallet connects to a specific address on the Bitcoin blockchain that indicates possession of coins. The blockchain is a public database that contains a record of all Bitcoin transactions. A bitcoin wallet is primarily a tool that interacts with the blockchain to make it easier to send, receive, and manage bitcoin.
Different types of cryptocurrency wallets
- For those of you who don’t want to install an app or software, you can just use web wallets. Some websites for exchanging cryptocurrencies offer web wallets. You can send, receive, and manage Bitcoin using a browser and an internet connection. The risk here is that some websites store private keys and addresses on a central server and are vulnerable to hacking.
- The desktop wallet is more secure than the web-based one. Downloaded and installed on a desktop computer or laptop, the software gives you complete management and control of your private keys, addresses, and funds. You just need to be extra careful as viruses and malware infecting the computer can make it vulnerable to hacking. A big problem can arise when the hard drive is damaged and inaccessible. In this case, the stored keys and addresses are lost, which means that proof of ownership for Bitcoin is also lost. The solution is simple enough: just make sure you back up your data.
- Mobile wallets are usually preferred by the majority. It’s convenient and you can manage your bitcoin anywhere by installing an app on your phones or tablets. Almost all digital devices are prone to hacking over the internet and all of them experience technical errors as the gadget gets older and is used more often. Remember to always back up your data and beware of malware and viruses.
- There are also offline hardware wallets, which are external digital devices that use a random number generator to generate public and private keys. These keys are stored in the device. This acts as a safe and provides more security. It is only accessible to a limited extent as the device must be connected to a computer in order to access the keys. This is recommended for those who have large amounts of bitcoin.
- The paper wallet is probably the safest way to store Bitcoin. A program generates private and public keys and these are printed out on a piece of paper with a QR code. The paper just needs to be kept safe, and photocopying can be used to make backups. Because as soon as the paper is lost and no more copies have been made, you will also lose your Bitcoin.
Based on the information provided above, you can easily choose which one is right for you. This bitcoin wallet beginner’s guide is just the tip of the iceberg. There is more to learn when trading cryptocurrency. It is highly recommended that you do your research and study so that you can make informed decisions.