What Is a Bitcoin Wallet?

A bitcoin wallet represents a software program which stores bitcoin (BTC) [coin_price] private keys. Often, wallets come in hardware and software for, the former being known as a hardware wallet. In general, they grant you access to your public Bitcoin address, often with Bitcoin Core and an internet connection, thus facilitating the buying and selling of cryptocurrency.

Obtaining a blockchain wallet is necessary in order to hold any type of crypto assets or digital currency. While there are certain solutions which would only allow you to hold one type of digital currencies, the wide majority of Bitcoin wallets, many harnessing the open-source programming of Bitcoin Core, also allow the user to hold multiple cryptocurrencies at the same time, including Ether (ETH), Bitcoin Cash (BCH), Monero (XMR), Ripple (XRP), Stellar (XLM), and others.

What Is a Private Key?

In the context of bitcoin, a private key represents a secret sequence of numbers and letters which allow bitcoins to be spent. Each bitcoin wallet contains at least one, or sometimes more, private key. The keys are saved within the wallet file and are mathematically related to all of the bitcoin addresses which are generated for the wallet.

Put simply, this is your “ticket” which will allow you to spend your bitcoins. As such, it is quintessential that you keep it secure. This is the reason for which all reputable cryptocurrency exchanges put the emphasis on advanced privacy when it comes to storing your digital assets.

Different Types of Bitcoin Wallets

There are many types of wallets: desktop, mobile, paper, web, and hardware. Many have different features allowing a span of financial activity like savings management or retirement planning. A good wallet review will make these features clearer.

Desktop wallets, as the name suggests, are installed on your computer’s desktop. These types of wallets offer full control over the software wallets. They enable the user to generate a bitcoin address for buying and selling bitcoin. Naturally, they also allow the user to store their private key.

A mobile wallet, on the other hand, provides for more convenience, as they aren’t fixed in one place. These usually come in the form of paid applications that you can run on your smartphone. In terms of functionality, however, a mobile wallet would allow you to do the same things as a desktop wallet. These differences can often be fleshed out in an online wallet review. One notable advantage is the fact that a mobile wallet could enable you to receive payments and make direct payments in physical stores which accept digital currency by scanning a QR code.

Among the various types of wallets —a mobile wallet, bitcoin wallet, etc. — is the paper wallet. This is nothing but your public and private key printed together. Technically, a paper wallet is a type of cold wallet because it is entirely offline. You can make a paper wallet out of any substance that you can print information on.

Differentiation can also be made based on the operating system the wallet can be used on. As such, you can have Android wallets (which are Android apps), Apps for iOS on iPhone and iPad, Windows, Mac and Linux, and so forth. Many software solutions are programs with a free download. Naturally, almost all of the hot wallets can be classified as Android wallets as they are usually supported by the operating system and they do have designated Android apps. Some wallets are compatible with mining hardware as well.

Hot Wallets vs Cold Wallets

The next differentiation is based on whether or not the wallet is connected to the internet. If they are connected, they are referred to as web wallets or, most commonly, a hot wallet. If it’s not connected and it operates entirely offline, the solution is called a hardware wallet or cold wallet.

Cold wallets are generally considered to be safer, simply because they can’t be tampered with by someone online. They are not connected to the internet and, as such, they are safe from any types of hacking attempts and attacks. This is a type of offline storage.

Hot wallets, on the other hand, are a web-based wallet which is actuallyonthe internet. In other words, in order to access them and to manage your BTC, you will need to have a stable internet connection. They offer a lot more flexibility and many of them have integrated solutions which facilitate the buying and selling of digital currencies. At the same time, though, they are considered to be less secure because they are connected to the internet and, hence, subjected to hack attacks.

Naturally, both solutions have their own benefits and drawbacks. Understanding them is critical when making the right choice finding a wallet provider for storing bitcoin.

Advantages and Disadvantages of a Hot Wallet

As with any wallet provider, hot wallets have their pros and cons. Being well aware of these advantages and disadvantages will enable you to make the right choice based on your particular preferences.

Pros of Using a Hot Wallet:

• Most of the hot wallets are beginner friendly and easy to use.
• They provide instant access to your crypto assets at any given moment as long as you have internet connection (Web-based wallet).
• They usually come with numerous layers of security features and backup options.
• They are compatible with most every operating system such as Windows, Mac and Linux, and Android, as well as mining hardware.
• 2-Factor Authentication for improved security.

Cons of Using a Hot Wallet:

• They offer a lower level of security features compared to cold wallets as they are always connected to the internet.
• They are run on centralized servers, hence are usually limited in terms of the number of transactions that can be handled, which may cause occasional delays.

It’s worth noting that hot wallets are very user-friendly and, as such, are particularly convenient for beginners looking to safely and securely store your cryptocurrency, or trade a relatively small amount of cryptocurrencies. If you’re looking to store your cryptocurrency in bulk, though, you might be better off with a cold wallet.

Advantages and Disadvantages of a Cold Wallet

Cold wallets offer offline storage solutions for those users who prefer to keep their private keys stored offline safely and securely off the internet. In order to gain access to the information stored offline on them, you would need to simply plug them to your computer. As this is their main characteristics, they reveal certain distinct pros and cons.

Pros of using a cold wallet:

• No one but the owner of the cold wallet has access to the information kept on it.
• They are not connected to the internet and, hence, provide greater security.
• They are excellent for long-term investors who would like to securely have their assets stored offline.

Cons of using a cold wallet

• Cold wallets are a bit more challenging to work with and they offer limited flexibility when it comes to transacting.
• A lot of them don’t accept all types of tokens
• They can be a bit expensive
• Difficult compatibility with mining hardware.

How to Choose a Wallet?

Naturally, if you want to get involved in buying and selling cryptocurrency and you are reasonable enough when it comes to the integrity of your personal finance, you need to pick the best Bitcoin wallet possible — not to mention the most secure wallet for your task.

One of the best things you can do, in case you are unsure about the type of solution you’d want to use, is to read a solid bitcoin wallet review, investigate Bitcoin Core, various apps, etc. It goes without saying that choosing the best bitcoin wallets will require you to determine whether you’d want to be actively trading or to simply store your bitcoin or any other digital currency for a longer period of time.

Here are some of the popular wallets used for storing digital assets.