A common question asked by those who are new to crypto currencies and bitcoin is what is a bitcoin wallet? Conceptually, you can think of it like a digital version of your traditional wallet in that it is used to save or store money. Instead of holding cash and credit cards; however, a bitcoin wallet is used to store private keys and it is encrypted with either a password or simply protected from unauthorized access to the wallet. A big difference from the overall Bitcoin network; however, is that a wallet is only controlled by its owner and is not shared and distributed like the overall bitcoin blockchain. As a result, keeping a bitcoin wallet safe is key to avoiding loss due to theft by those who want to take your money. There are a number of types of bitcoin wallets available to choose from if you are just getting started in the crypto currency market, and we will review each of those below when you are looking to buy bitcoin today.
What are the Types of Bitcoin Wallets?
As the usage of bitcoin continues to grow world-wide, there are a number of bitcoin wallet types available for you to choose from. Each of them conform to the published Bitcoin protocol so that you can use them to receive and send money regardless of their location or implementation. You can think of this as being similar to using different email accounts to transmit and store information with different service providers since all are required to speak in the same protocol in order to communicate with each other. Bitcoin wallets also vary in the fact that they can be saved locally, online, or anywhere that you can safely store data.
What are the Categories of Bitcoin Wallets?
There are several types of categories of bitcoin wallets available that allow you to receive, send, and store your bitcoin. These include Web, desktop, mobile, hardware, paper, and brain (or those that require a pass phrase to use). The following is a short summary of each type of wallet to help you better understand the different types of bitcoin wallets available for you to choose from today.
Bitcoin Desktop Wallets
Those who like to have full control over their bitcoin wallet can install wallet software directly on their computer. This lets you have complete control and responsibility for the security of your wallet. In this setup, the private keys are stored on the hard drive of your computer or device so that the only place the funds can be access from is from the device. In the event the file gets corrupted, the bitcoins that you have stored in the wallet will be lost forever if you did not have a backup saved of the data. Similarly, you will want to make sure that you use an extremely strong password for the wallet to help guard against those who might try to steal it. To date, there are two main types of desktop wallets available: light and full node clients. A full node will save a full copy of the blockchain that takes up more than 30 GB of space. A light client will take up less space and require an external source to read the full block chain to conduct a transaction.
Mobile Bitcoin Wallets
These wallets are typically a light wallet client that is designed for use on a mobile device. They are able to navigate easily with the touch screen interface that consumers have gotten used to using. Similarly, if you are like many of the folks who are new to the bitcoin world, then you are likely going to use Coinbase at some point which offers a free mobile wallet for both the Andreoid and iOS operating systems that allows you to buy, sell, send, and receive bitcoin.
What are Paper Bitcoin Wallets?
A paper bitcoin wallet is simply a way to print or include bitcoin on a physical “thing” like a piece of metal or paper. Similar to losing a $100 bill, once you lose a paper bitcoin wallet, you lose the value stored in it forever.
Bitcoin Web Wallets
This type of bitcoin wallet lets you send, store, and receive bitcoin through your Web browser. They are normally hosted and offered by the company who manages the overall security of the private keys that are associated with your account. Some wallets will give you the ability to manage your private keys if you are a power user; however, many new users of bitcoin find them convenient from the aspect of minimizing the overall learning curve when it comes to getting started buying and selling bitcoin. Those who have been around for a while do not necessarily like the overall loss of control that comes with using a web wallet, so make sure that you are taking the appropriate security precautions when it comes to managing your online account.
A bitcoin hardware wallet is a specially designed device to store bitcoins and are much harder for those who are maliciously minded to try to compromise when compared to a mobile or light wallet. This comes from the fact that they typically only have the minimum amount of software stored on the device to save bitcoins and make them more difficult to attack or hack.
So what the heck is a “Brain Wallet” ?
Some people may get confused when coming across the term, “Brain Wallet” for storing their bitcoins. This type of wallet is created from a passphrase and is very similar to a paper wallet. If you lose the passphrase, then you lose the bitcoins that are stored in your brain wallet. With the high degree of security required to properly secure a bitcoin wallet using this technique, it is typically recommended that you use this method with caution when making the decision on what type of bitcoin wallet that you are going to use to store your hard-earned bitcoin.