Last updated on March 22nd, 2018 at 03:53 pm
Table of Contents
What should you know about Bitcoin Wallets?
Introduction of Bitcoin Wallets
Although Bitcoin is a decentralized worldwide currency with no need of Banks for its control and distribution, it needs a place of safekeeping. Bitcoin wallets are required just for this; just as Bitcoin is digital, so are most wallets. Yet, unlike a bank account, a Bitcoin wallet assures the anonymity of the wallet owner and is really easy and quick to open. In fact, it takes only a few minutes to open a wallet, which activates immediately.
Every Bitcoin wallet has a wallet identification and a wallet address. No matter the operation one wishes to carry out with Bitcoins, a wallet is required. Bitcoins are mined into a wallet and are sent into or from a wallet to another in a Bitcoin exchange, in fact, a Bitcoin transaction always involves a transfer of the digital currency from a wallet to another. Owing to the fact that every Bitcoin transaction is given a sort of identification called a hash code, which is displayed on the Blockchain, a Bitcoin transaction can be traced. And using the information of the wallet addresses displayed, Bitcoin wallets can be hacked into.
Types of Bitcoin Wallets
There are several Bitcoin wallet types to choose from based on preference and security. Cold wallets are those which can be used offline and are recommended for storing large amounts of Bitcoin, while Hot wallets are only used when connected to the internet and are better for storing small amounts of Bitcoin for regular use. Even if encrypted, the security of some wallets can be breached, using keylogging hardware or software. There are also Hardware Bitcoin wallets that are able to securely store Bitcoins in a physical portable hardware device, hence serving as a vault. They can be connected online and used for sending and receiving Bitcoins. Trezor and Ledger HW.1 are good Hardware wallets.
Another type, the Software wallets, could be downloaded as either Desktop wallets for laptops and personal computers or Mobile Bitcoin wallets, which are made specifically for smartphones using various operating systems including Windows, iOS, and Android. Mycelium, Blockchain, Airbitz, and GreenBits are very good Mobile wallets.
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To leave the computer system altogether, Paper wallets were developed. These paper wallets are safe even if your computer is stolen or there is an Internet security breach. And currently, some online web wallets such as Coinkite and Copay can have 2 or more owners, hence are multi-signature Bitcoin wallets. To transact with such a wallet, all owners must co-sign.
All these various types of Bitcoin wallet are developed to ensure a thorough security, on the part of the wallet developers, but the wallet owners also have a huge responsibility in wallet security. Therefore, such precautions as encryption with very strong passwords, backing up of the entire wallet using regular or more complex backup methods, depending on the wallet type and also, the use of a two-factor authentication to access your Bitcoin wallet, must be followed. And if you have large amounts of Bitcoin and don’t make frequent transactions it is best to use an offline hardware storage.
To monitor their performance, voluntary review forms are issued through online wallets to wallet owners. Wallets like Blockchain also offer news and information about Bitcoin and offer an opportunity to directly purchase other digital currencies such as Etherium. With continuous improvements, we expect to see even more impenetrable wallets in the next few years, because wallet owners understand that their Bitcoin is as good as its security.