April 5th, 2018
Before you start using digital currencies, like Bitcoin, it is important to know where Bitcoin is stored. It is stored in a place called a “Wallet.” To be more precise, this digital wallet holds the private key which allows the user to access Bitcoin addresses (also known as a public key). Digital wallet software is designed perfectly, it will look as if digital currencies are stored there, this makes using Bitcoin more intuitive and convenient. Digital wallets hold several private keys, many modern-day Bitcoin investors have several digital wallets. Digital wallets can be live on your mobile device, computer, tablet or on a piece of paper or a physical storage gadget. Below you’ll find an overview of different digital wallets that are offered today:
Electronic wallets are downloaded software tools. This software tool is installed on your mobile device or computer and it facilitates all transactions. Cloud-based digital wallets are known to have a more user-friendly interface, but you need to be able to trust a third party with your private keys.
Installing digital wallets directly onto your device or system gives you the security of controlling the keys. Most of these wallets are easy to configure and available for free. The only disadvantage of these digital wallets is that it requires more maintenance in the form of backups. In case your system or device gets corrupted or stolen, your private keys are also lost and you lose your Bitcoin. These wallets require greater security precautions. If the system gets hacked and a thief gets your private keys, he can easily get ahold of your digital currencies.
Online or cloud-based digital wallets offer increased convenience, users can access their Bitcoin from any device using the right passwords. These are easy to set up and come with mobile and desktop apps. Now spend and receive digital currencies easily using this free online wallet. The only concern with this wallet is the potential low security. As private keys are stored in the cloud, you need to trust the host’s security features. However, there are some storage apps coming up in the market that are providing additional security features.
Mobile wallets are apps for tablets or smartphones and are useful if you want to pay for something using Bitcoin while you shop. All online wallets and most desktop wallets have mobile versions. On the other hand, the mobile wallets, such as Airbitz Bread were designed with mobile use in mind.
Hardware digital wallets are small devices which are occasionally connected to the internet to enact digital currency transactions. These are extremely secure, and they are generally offline and not hackable. These wallets can only be lost or stolen, along with Bitcoins that are stored in it. Many large investors keep hardware wallets in secure locations such as safe boxes or bank vaults.
These wallets are the simplest wallets, these are mere pieces of paper where you can enter your private and public keys. These wallets are ideal for long-term storage of digital currencies away from water and fire. Paper wallets are ideal for giving gifts to friends and these wallets are considered to be more secure since they are not connected to the network. However, these wallets are easier to lose.
This is one of the most important questions asked by millions of digital currency users. The safety of the digital wallet depends on the format and version of digital wallet you are using and how it is used. The best option for most is a hardware wallet which will keep you offline and can be stored it in a secure place. This wallet will ensure that your account won’t be hacked and your keys are not stolen. If you lose this wallet, you digital currencies will also be lost.
The least secure option is online wallet as third parties hold the keys. Some smart digital currency users opt for hybrid approaches. These investors hold a long-term and core amount of Bitcoin offline while having a spending balance for regular use in a mobile account. User choice will depend on Bitcoin strategy and willingness to get “technical.”
No matter what option you choose, be careful about your selection. Back up everything and never share where all these backups are stored to anyone.