Bitcoins are the virtual currency system, where the transactions take place quickly and easily. Initially, Bitcoins were not used by many people. But as it has profitable returns, many people opted for bitcoin investment. Bitcoins are generally stored in a wallet, a file either stored in the cloud or a computer system. This article gives deep insight into what a bitcoin wallet is and how it is used.
The technical meaning of Bitcoin wallet
The Bitcoin wallets are the files that hold the digital currency. To make a Bitcoin transaction, the user must contain a public wallet address and a transaction signature. These both can be accessed only with a private key, which is known as the Bitcoin wallet. You can invest in bitcoins using online platforms
Types of Bitcoin wallet
There are many types of Bitcoin wallets. The following section discusses Bitcoin wallet types.
1. Bitcoin in a paper wallet
As the name indicates, the paper wallets are just like a document, where the receiver’s public wallet address and the sender’s private key will be printed as QR codes in the paper. By scanning those codes, through software, the keys can be entered and initiate the transaction process. The paper wallet is safe from hacking as it is done offline.
But there is much vulnerability for spying your paper document while generating the keys. So it is mandatory to use operating systems like Ubuntu and use a safe printer that is not connected to the internet. The paper wallets have to be safeguarded in a waterproof cover to avoid getting wet and tampering.
2. Physical Bitcoin
Like the standard coins, Bitcoins took the shape of credit first, loaded with some amount of Bitcoins. Later on, it takes the form of a gold medal. The medal can be used for transactions only with a private key, and these private keys will be hidden inside a removable hologram. The key will be available as a tamper manifest seal. By doing so, the Bitcoins can be used for transactions.
This type of wallet allows you to store your Bitcoins physically and thus aiding for offline transactions. But the main disadvantage is that there are many malfunctions with physical Bitcoins, and hence the usage of physical Bitcoins has been stopped.
3. Mobile Wallets
For those who need frequent usage of Bitcoins for online shopping, mobile wallets will be handy. The users need to download e-wallets to their Smartphones. The user’s private key will be generated, which can be used to make payment for any online shopping that supports Bitcoins.
Mobile wallets are beneficial for frequent Bitcoin users. They can give a single tap for initiating a Bitcoin transaction. But the mobile wallets can be hacked by hackers, and the Smart Phones without locked security allows the wallet access by anyone who uses your phone.
4. Web wallets
In the case of web wallets, the private keys will be stored in a server. The user can acquire their private key using registering their account with the e-wallet website. The user will be provided with login details, and after login, a code will be generated to access the digital wallet.
Again though it has lots of benefits, the websites are vulnerable to hackers, and the third parties might be fraudulent who might gain access to your private key leading to the loss of all the Bitcoins.
5. Desktop wallets
In the case of e-wallets, the e-wallet software can be downloaded on the desktop systems, and the private key can be generated on your order. But as they are files, there is a chance of viruses corrupting your system and leading to the loss of entire wallets. Or sometimes, hackers might hack your system while connected to the internet. So, appropriate protection mechanisms must be enforced for safe transactions.
Thus there are different types of wallets available for Bitcoin transactions. Each one has its one advantage and disadvantage. It depends on the user’s convenience to choose any Bitcoin wallet, which must have specific protection mechanisms for a safe transaction.