Bitcoin is a cryptocurrency and worldwide payment system. It is the first decentralized digital currency, as the system works without a central bank or single administrator. A Bitcoin wallet is a place that stores your digital Bitcoin and validates your transactions when you’re using your Bitcoin. A wallet keeps secret information, called a private key or a seed, which is used to validate transactions and “sign” them so that your Bitcoin can be used to make purchases or exchanged for another asset. This prevents someone else from using your Bitcoin or the transaction being altered by a third-party. Often when people refer to a Bitcoin wallet they are actually referring to a crypto exchange that offers a wallet as part of their account features. In this sense, the wallet is just the place where all of your cryptocurrencies are kept, or where you can keep fiat money for future use.
Features Found in Bitcoin Wallet
QR code recognition
Advanced users: Hardware wallets offer the best security and people very comfortable with computers should have no problem navigating the additional complexities. Trezor and Ledger are great choices for this group.
Beginners: Consider starting with an online wallet that charges very low fees for transactions. SoFi, Robinhood, and Coinbase are best for this group. If you have a strong investment background, SoFi, Robinhood, and Exodus are good choices.
Crypto enthusiasts: Consider a dedicated cryptocurrency wallet that gives you either added security or enhanced features. Coinbase, Trezor, Ledger, Edge, and Exodus are solid options.
The wallet may be free if one is storing Bitcoin in the preferred wallet. The person hosting the device responsible for one’s wallet is charges according to the services offered. In most cases, purchasing a bitcoin wallet can cost $200 or above that.
How it Operates
The blockchain evolution orchestrates the wallet performances by wiring bitcoin transactions During transactions, a value of more than one wallet is transferred by using private key and submitting records on that.
Factors to Consider While Investing in Bitcoins
Ensure that both your wallet provider and exchanges you use are ready to manage systemic improvements like “segregated witness” (segwit) or occasional hard forks as blockchain technologies emerge and evolve over time.
Funding or cash flow liquidity risk is another factor that can negatively affect your ability to make a trade expediently when trading volume is at its peak. You can learn more about liquidity risk on Investopedia, and view detailed information about exchanges on Coinmarketcap.com.
When the market value of a cryptocurrency can rise and fall very quickly, the speed of any platform’s customer service is very important should anything go wrong –and this is particularly important for cryptocurrency exchanges. When doing your research, always be sure to include the “customer service” search term for any exchange, trading tool, or wallet.
QR Code Scanner
If you’re looking for a mobile wallet, a QR code scanner is a must. The best mobile crypto wallets will be able to generate and scan a QR code for coin transfers, which will prevent you from having to type out your long public key to send or receive funds. Anything can go wrong, as any old school Windows user will know –remember those annoying license keys?
Sharing of Account
This relatively new feature allows users to setup multiple private keys for a single wallet and is ideal for families or business partners. If you’re sharing your crypto wallet with another user, it’s possible to require all parties to confirm a transaction. This is called a “MultiSig” account.
Converting one cryptocurrency into another is a really handy integration to have built right into your wallet. This is another feature I love about Exodus, which uses ShapeShift to make this possible. I can’t stress how useful this feature is to have integrated within your wallet, as it also makes cryptocurrency arbitrage very easy.
Open source wallets allow third parties to review their code in its entirety, meaning that if there’s anything amiss, it will be widely reported; traditionally cryptocurrency users feel less secure when they use wallets with proprietary code and they can’t see what’s under the hood. Many new wallets are often buggy and aren’t quite ready for mass consumption.
The Major four types of Wallets
The Bitcoin wallets are categorized into four aspects which include:
Ledger: Best Hardware Wallet for Durability
The Ledger Nano X and Ledger Nano S are hardware wallets that keep your bitcoins safe in an offline device. About the size of a USB flash drive, Ledger devices connect to your phone or computer to store and access your digital holdings. The device is surrounded by a stainless steel cover, which makes it very durable.
Robinhood started as a free stock trading platform and has expanded to include Bitcoin and other cryptocurrencies. Robinhood is both a wallet (to store currency) and an exchange like Coinbase (to buy/sell currency), so everything is in one place. However, you can’t transfer coins to and from Robinhood with another wallet.
Robinhood is a mobile-first platform but has a desktop version, too. And what really sets Robinhood apart is that it’s completely free to use. There are no commissions when buying or selling Bitcoin.
Exodus is a software wallet that lives on your laptop or desktop computer. There’s a mobile app version available as well. This digital wallet includes an attractive user interface that puts many investor-focused tools in your hands.
The desktop-first wallet, which also integrates with Trezor wallets, turns your digital currencies like Bitcoin and many others, into a portfolio with graphs and charts. You can exchange and store coins right on your desktop or in the app. It supports more than 100 different digital assets, too.
Types of Bitcoin Wallets
Physical Bitcoins is a suitable kind of wallet that safely stores funds both offline and online as they are known as an awarded collector’s commodity.
This a printed QR-codes containing a private key with a public address for receiving Bitcoin. The private key enables both expenditure and transfer of Bitcoin stored in the address after scanning. A paper wallet can be initiated using services like Bit Address that allows users to create an arbitrary Bitcoin address with its own private key.
Mobile wallet operates as an app on smartphones like Android by storing private keys and facilitating payments through phone.
The major con in mobile wallets is hacking as one can lose control of the wallet if someone hacks one’s mobile.
Other type of bitcoin wallets include:
Anonymous and Private
Fewer risks for merchants
Elimination of Banking Fees
Money Laundering/Black Market
Lack of recourse
Possible Government Interference
Degree of acceptance
Wallets Can Be Los
Proponents of cryptocurrencies argue that digital currencies are easier and safer, and come with better privacy than traditional currencies. Because of its limited supply, Bitcoin has shown up on some people’s radar as an investment opportunity as well. However, it should be noted that cryptocurrencies are still risky investments.