A Brief Guide To Bitcoin Wallets, Bitcoin holders have ”several storage options” to choose from, and while this is a good thing, it could also get a little overwhelming for the average user. This guide addresses the problem of plenty, giving you a brief introduction to Bitcoin wallets and which type could work best for you.
What Is A Bitcoin Wallet?
A Bitcoin wallet is a digital wallet that enables the user to send and receive Bitcoin. Unlike an actual wallet that holds physical currency, a Bitcoin wallet holds the user’s private key and public address.
It is impossible to ”store or transact with BTC” without a wallet. Several types of wallets exist in the market, each catering to different requirements and offering varying degrees of convenience and security.
How Does A Bitcoin Wallet Work?
Bitcoin wallets use cryptographic key pairs to send or receive BTC. In addition, The key pair consists of a private key and a public address. Your public address is used to receive funds and to identify your account on the network.
The private key is used to sign transactions and prove that you are the owner of your coins. The private key shouldn’t be shared with anyone under any circumstances. If you lose control of your private key, In addition, you lose control of your coins, it’s that simple.
Types Of Bitcoin Wallets
There are several types of Bitcoin wallets that you can choose from; let’s take a brief look at each type.
Desktop wallets have to be downloaded and installed on your laptop/desktop, with the private keys being stored on your hard drive or Solid State Drives. The wallets are accessible only from the device that they have been downloaded on and offer a significant level of security compared to online wallets and mobile wallets, but they also pose a risk.
Desktop wallets are ideal for individuals who plan to trade with small amounts of Bitcoin. Exodus is an example of a desktop wallet.
Exchange wallets store your private keys on a third-party server. This method may be convenient but comes with its fair share of risks because the wallet is online, and the threat of hackers is always present.
However, Rain offers users more safety than conventional exchange wallets because it is regulated by the Central Bank of Bahrain, and utilizes bank-grade security to safeguard assets in its custody.
Mobile wallets are ideal for users who use Bitcoin frequently (paying for goods using BTC or daily trading). The wallet is essentially an app on your mobile phone that stores your private keys, In addition to allowing you to transact, trade, or store crypto from your phone itself.
Experts always advise keeping only a limited amount of Bitcoin in mobile wallets, with the rest in more secure storage options such as hardware wallets. Mycelium is a popular mobile wallet.
A Bitcoin hardware wallet stores your private keys in a physical device similar to a USB and is widely considered the most secure option for storing your Bitcoin. Hardware wallets are capable of making online transactions but are stored offline, which increases security substantially.
They also offer compatibility with several types of web interfaces and support several types of currencies. While some users may find transacting with hardware wallets a cumbersome task, it is relatively easy.
- Simply plug in the device to your laptop.
- Enter the relevant pin, confirm and complete your transaction.
Hardware wallets provide relative convenience while keeping your assets offline and out of harm’s way. Trezor and Ledger Nano are examples of hardware wallets.
A paper wallet is simply a physical copy or document containing a public address that can receive Bitcoin and a private key that enables the user to spend or transfer the Bitcoin from the particular address.
Often, a paper wallet will be printed in the form of a QR code, In addition to allowing users to quickly scan them, add the keys to a wallet app/software wallet, and make a transaction. The main advantage offered by paper wallets is that the keys are stored offline, making them immune to hacking attacks.
How To Set Up A Bitcoin Wallet?
Let’s understand how to set up your Bitcoin Wallet.
Desktop wallet – Once you have selected your preferred wallet, simply download the wallet and go through the installation process. Note your private key and you are good to go.
Exchange wallet – Set up an account on and exchange like Rain. Enter the required information, set up your password and 2FA, finish your KYC and you are good to go.
Mobile Wallet – Download the wallet app, create your account and note down the private key. Transfer crypto to your wallet and you’re all set.
Hardware Wallet – Once you have purchased your hardware wallet (Trezor, Ledger Nano), follow the instructions provided and install the wallet software to interact with its interface.
Paper Wallet – You can generate your paper wallet through a wallet generator. Once this is complete, download the public address and private key.