What Is a Bitcoin Wallet?
A Bitcoin wallet is a software program where Bitcoins are stored. To be technically accurate, Bitcoins are not stored anywhere; there is a private key (secret number) for every Bitcoin address that is saved in the Bitcoin wallet of the person who owns the balance. Bitcoin wallets facilitate sending and receiving Bitcoins and give ownership of the Bitcoin balance to the user. The Bitcoin wallet comes in many forms; desktop, mobile, web, and hardware are the four main types of wallets.
Understanding Bitcoin Wallets
A Bitcoin wallet is also referred to as a digital Wallet. Establishing such a wallet is an important step in the process of obtaining Bitcoins. Just as Bitcoins are the digital equivalent of cash, a Bitcoin wallet is analogous to a physical wallet. But instead of storing Bitcoins literally, what is stored is a lot of relevant information like the secure private key used to access Bitcoin addresses and carry out transactions. The four main types of wallets are desktop, mobile, web, and hardware.
Desktop wallets are installed on a desktop computer and provide the user with complete control over the wallet. Desktop wallets enable the user to create a Bitcoin address for sending and receiving the Bitcoins. They also allow the user to store a private key. A few known desktop wallets are Bitcoin Core, MultiBit, Armory, Hive OS X, Electrum, etc.
Mobile wallets overcome the handicap of desktop wallets, as the latter are fixed in one place. These take the form of paid apps on you. Once you run the app on your smartphone, the wallet can carry out the same functions as a desktop wallet, and help you pay directly from your mobile from anywhere. Thus a mobile wallet facilitates making payments in physical stores by using "touch-to-pay" via NFC scanning a QR code. Bitcoin Wallet, Hive Android, and Mycelium Bitcoin Wallet are few of the mobile wallets. Bitcoin wallets do not generally work on both iOS and Android systems. It's advisable to research your preferred mobile Bitcoin wallet as several malware softwares posing as Bitcoin wallets are an issue.
As for web wallets, they allow you to use Bitcoins from anywhere, on any browser or mobile. The selection of your web wallet must be done carefully since it stores your private keys online. Coinbase and Blockchain are popular web wallet providers.
Hardware wallets are by far the most secure kind of Bitcoin wallet, as they store Bitcoins on a physical piece of equipment, generally plugged into a computer via a USB port. They are all but immune to virus attacks, and very few instances of Bitcoin theft have been reported. These devices are the only Bitcoin wallets that aren't free, and they often cost $100 to $200.
Keeping your Bitcoin wallet safe is essential as Bitcoin wallets represent high-value targets for hackers. Some safeguards include: encrypting the wallet with a strong password, and choosing the cold storage option, i.e., storing it offline. It's also advisable to frequently back up your desktop and mobile wallets, as problems with the wallet software on your computer or mobile device could erase your holdings.