BITCOIN WALLET FOR HOLDING CRYPTOCURRENCIES

Many new crypto industry users faced a little difficulty – what is a crypto wallet? What is it and what is its function? Does a Bitcoin wallet really hold bitcoins? Is it possible to create one wallet for absolutely all cryptocurrencies? We offer you to understand these issues and find out all the subtleties and understand the terminology.

A Bitcoin wallet is the first step towards using cryptocurrency. The wallet allows you to receive, store, and transfer bitcoins, including other cryptocurrencies, for example, some of the forks of Bitcoin, such as Bitcoin Cash (BCH), Bitcoin Gold (BTG), Bitcoin Diamond (BCD), Lightning Bitcoin (LBTC) and others.

A Bitcoin wallet is your interaction channel with Bitcoin coins. A blockchain network, just like online banking acts as a so-called “bridge” between you and the financial system. In other words, the bitcoins are stored in the blockchain network, and not directly in your wallet

It doesn’t matter if you decide to keep your savings in crypto, have a large capital, are a beginner, or just plan to deal with cryptocurrencies or digital assets – you will need to create a crypto wallet. For example, a Bitcoin wallet is a software algorithm that allows you to sign transactions on the blockchain network, as well as store a public and private digital key. It is also important to know and remember that once the cryptocurrency is sent to another wallet, the transaction cannot be reversed.

In general, to start working with Bitcoins, the user must first have a Bitcoin wallet to hold cryptocurrency. However, despite the widely held belief that a wallet stores cryptocurrencies, this is far from being the case. Wallets provide a tool for interacting with the blockchain network instead of storing the coins themselves. Simply, a cryptocurrency wallet is a mechanism that is necessary to work with the blockchain network. So that you move coins within this network and assign the rights to own these coins to a particular user. The wallet acts as a kind of data generator for sending or receiving a certain cryptocurrency through transactions. This data consists of a public and a secret key, and sometimes several of their pairs, to include, based on this, the identifier (wallet address) from where the sending was made and/or where it is necessary to make a deposit.

Since Bitcoin wallets contain secret codes and private keys, which in turn allow you to spend your bitcoins, these are the keys that need to be stored and protected from intruders. This private key gives you access to your cryptocurrencies. For an analogy, we can give an example with a fingerprint scanner on the phone – the scanner itself is your wallet, the phone is the blockchain system, and your fingerprint is the key. The scanner remembers all the fingerprints that you have entered into its memory, and if these fingerprints are present, it will open access to the coin vault.

A cryptocurrency wallet is a web resource, order, or device containing private keys for storing and transferring cryptocurrency. There are such types of crypto-currency wallets according to their mechanism of work:

• Cold wallets– a device that is visually very similar to a USB drive and works offline (does not connect to the Internet). When connected to a PC, the device allows you to access your savings and check the coins balance of your wallet. The main task of this device is to generate private (secret) and public (public) keys, to store them directly on the device itself, and allow further access to the cryptocurrency. Not possible to make any transactions or transfer coins without access to this device.
• Hot wallets– is an online service that stores all the same access keys for making transactions. However, unlike a cold wallet, it is used to store small amounts for everyday use. For example, we can cite exchange wallets, which a user (trader) receives when registering a crypto-currency exchange account. It also includes multi-currency cryptocurrency wallets that can store several coins or forks types.

However, their use is inferior in the convenience of everyday use, since each time it is necessary to have at hand the device where the keys are stored.

Hot wallets are more used for storing small amounts or everyday exchange trading, as well as for use in everyday life to pay for goods and services in developed countries. For example: in some countries, you can pay with cryptocurrency directly in the grocery store, without using cash or a bank card.

Bitcoin wallets for hodling BTC are of different types. They are fundamentally different from each other. According to type, all wallets are divided into three groups:

• software;
• hardware;
• paper.

These groups include the following types of cryptocurrency wallets:

• Online wallets;
• Local and paper wallets;
• Hardware storage of digital currency;
• Mobile e-wallets.

Each of these types has both advantages and disadvantages. Some of them have a cross-platform basis – when a mobile wallet and an online wallet are one device. You need to choose the type of wallet depending on how often you will use it and for what specific purposes it is needed. If you will use your bitcoins often, then using a cold wallet will be less convenient.

The online wallet is perfect for users who daily exchange transactions with bitcoins, for beginners on the crypto-currency market. An online wallet is often used to keep little amounts, however, the retention period is short, as cloud technologies are often attacked and hacked. An online wallet is a virtual account where all the necessary keys to access your funds are stored. Also, online wallets are actively used by traders for everyday digital assets trading. However, it is better not to use such wallets for long-term digital assets holding. Very often, the theft of funds is carried out precisely by hacking online wallets.

Local wallets (software) – a program that is downloaded and installed on the user’s PC. The level of security and reliability of such wallets is an order of magnitude higher than that of online wallets. Well suited for those who use cryptocurrency or electronic money in everyday life. Software wallets are divided into:

• Desktop wallets are a program that can only work from under your personal computer;
• Web wallets – a cloud platform used to store information about keys. Of the minuses of software wallets, one can single out the fact that, like any program, this wallet type can be infected with viruses.

Paper wallets – are printed paper sheets that contain the private and cryptocurrency owner’s public keys. Often, a QR code is used as an encryption method, however, the method has not taken root in the use of this type of crypto-wallets. As a disadvantage, in case of loss or damage, the blockchain keys will be lost forever.

Hardware storages of digital currency – are considered the most reliable storages of confidential information about your keys and access to digital coins, since everything is stored directly on the device itself. At the same time, there is no access to the Internet, which makes it impossible to be hacked. To execute a transaction, you need to connect a hardware wallet to your computer via a USB connector. And in case of loss of access to the device, the hardware wallet can be restored.

Mobile electronic wallets – are an order that is installed on a mobile device, which contains not only the ability to generate keys and sign transactions but also directly make payments for goods or services using cryptocurrencies directly from the device. To do this, use NFC technology or a QR code.

Cryptocurrency wallets are an important and integral blockchain network mechanism that allows you to send and receive funds using the blockchain network. Crypto wallets form the backbone of the cryptocurrency system infrastructure. The name “wallet” nevertheless indicates that the main function of this technology is, first of all, to save money. Each type of wallet has its own purpose, as well as pros and cons. It is important to understand and understand how each of the types arranged wallets and how they work before you begin to actively use each of the above types. Different crypto wallets are customized for the different needs of their owners. Despite its name, a crypto wallet is not a vault, but has a general resemblance to a wallet – it can also be taken possession of. Therefore, an extra measure of caution will not be superfluous.