What is a Bitcoin Wallet?
Bitcoin just like any other type of money must be stored somewhere. We usually keep our paper money in a wallet, in a cookie jar, or even under the mattress but you can’t just keep your Bitcoin like that. For storing your Bitcoin you need a digital wallet. Here is some more information about Bitcoin wallets.
Why Use A Bitcoin Wallet?
Having a Bitcoin wallet is like a basic necessity and a first step to using Bitcoin. The wallet will enable you to mine cryptocurrency, trade, and purchase Bitcoin. Moreover, with a Bitcoin wallet you can do what you do with a real wallet — pay for goods and services.
How to Use A Bitcoin Wallet
Although all Bitcoin wallets have their own unique features, they share some processes. This is how you generally use a wallet.
- Create your Oobit account or alternatively sign up to download a mobile or desktop wallet.
- Make sure you use a strong password, every wallet will give you a basic guideline on how to create one.
- Generate a Bitcoin address or make use of one that is already provided.
- If your wallet offers you the opportunity to use a unique Bitcoin address for every transaction, make use of it.
- Make sure you write down your passphrase or store your private key in a safe place.
Types of Wallets
Just like physical wallets, digital wallets also come in many different forms. All of these wallets have their own benefits, while some have some disadvantages as well. It is important to make a wise choice so that balances both ease of use as well as security. Here are some different types of wallets and information on how you can use them.
- Web Wallet
A web wallet as the name suggests allows you to keep your Bitcoin on the internet. It essentially stores your private keys and is convenient because it allows you to move funds easily. A lot of these web wallets allow you to store multiple cryptocurrencies. On the flip side, these wallets are not very secure and are vulnerable to attacks from hackers. If you store all your cryptocurrency on such a wallet, there is a high chance of loss due to the underlying security issues.
- Hardware Wallet
Just like the wallet you keep in your pocket, a hardware cryptocurrency wallet assumes is something tangible. These wallets sometimes resemble a USB thumb drive. You can keep your cryptocurrency on the hardware wallet and keep it disconnected from the internet, this is termed as “cold storage.” Some types of hardware wallets allow users to store multiple cryptocurrencies. The drawback of such a wallet is that they do not allow users to move their cryptocurrencies quickly as in the case of web wallets, which could mean the loss of trading opportunities especially during periods of excessive price volatility.
- Desktop Wallet
Desktop wallets are capable of storing Bitcoin on computers as a private key. Security-wise they are somewhere in between an online wallet and a hardware wallet. However, these wallets can still be prone to attacks by hackers, especially if your computer is not protected adequately against online threats.
- Mobile Wallet
A mobile wallet is an application, which you can download onto your mobile device. These types of wallets are extremely useful for those who would like to take their cryptocurrency with them. Increasingly, mobile wallets are gaining features like being multi-currency. In terms of security, these wallets share risks with desktop wallets.
- Paper Wallet
This wallet is basically your private key printed on a piece of paper. A paper wallet is considered to be the coldest of all wallets. These wallets have some drawbacks such as they are printed on a fragile piece of paper and as such are prone to fraying and other damage. They are also easy to lose and once they are lost, there is no quick way to access coins stored on them. However, some people tend to favor paper wallets as they offer them the benefits of cold wallets without having to actually purchase a device. Paper wallets share the disadvantages of hardware wallets.