What is a Bitcoin Wallet?

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Just as you can store physical money in a wallet that you carry around, digital currencies use digital wallets for storage and payments.

Whether you want to speculate on the value of a bitcoin, or need a place to send and receive coins, here’s what you need to know about bitcoin wallets and how they work.

Remember that cryptocurrencies are speculative investments where all your capital is at risk, meaning you could lose all your money.

Cryptocurrencies are disorganized in the UK and if something goes wrong you will not receive any compensation.

What’s in a Bitcoin Wallet?

The most important thing to note is that bitcoins such as cryptocurrencies do not actually ‘exist’ in cryptocurrencies. The ‘coins’ themselves are placed on the blockchain.

Remember, bitcoins have no physical representation – they only exist as numbers on the screen. Thus a bitcoin wallet contains the public and private keys of your bitcoin holdings, both of which are required for transactions.

The public key is best compared to a bank account number. By itself, it does not provide access to the assets in your wallet.

A private key is basically a password in the form of a long string of letters and numbers that you keep secret. If someone has access to your private and public keys, they will be able to spend your bitcoins or transfer them to other accounts without your permission.

Your wallet address is also a unique, alphanumeric number string. This is actually a ‘hashed’ version of your public key. Hashing occurs when you insert data of any size into a hashing algorithm to create an almost unique character string of text.

Because a public key is a very long string of text, hashing it makes it smaller and more shareable, which is why it is used to create your bitcoin address.

To send bitcoins from your wallet, you simply log in, enter the address of the recipient’s wallet and input how much you want to send. To receive bitcoins, you simply share the address of your wallet.

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Wallet Types

Wallets can be ‘hot’ or ‘cold’ and either ‘hosted’ or ‘unattended’. Here’s a look at the differences between the different types.

Warm wallet These are where your public and private keys are stored online, either with a crypto exchange like Coinbase, or with an expert provider. They are known as ‘hot’ because they can be hacked on the internet, and have actually been in the past.

Warm wallets can be either Hosted Or Non-concentration. The first are wallets that offer exchange (the place where you buy your crypto) for free. Hosting wallet providers usually keep your private keys safe for you, which can save you a lot of headaches if you forget your account password because the provider will be able to help.

Non-concentrated hot wallets are not offered through the exchange and are entirely under your control. That means you keep your private key alone. If you lose it, you will be excluded from your holdings.

Cold walletsSometimes called hardware wallets, are physical storage devices that are not connected to the Internet, but are connected to a computer via USB.

Your private and public keys are safe in a cold wallet, and they are more secure than hackers because there is no direct connection between their computers and your storage device. However, malware can be used to access cold wallets when they are connected to a computer.

If you lose the recovery phrase needed to access your cold wallet, there is no provider to offer support, so you will not be able to retrieve your public and private keys – effectively giving you your bitcoin Out of holdings.

You can also download wallets to your smartphone or desktop computer, but they will only be as secure as the virus and malware protection you have installed.

Purse selection

When choosing a wallet, you should consider the level of security you are comfortable with, how much you want to pay for storage, and how much responsibility you want to take on your private keys.

Whether you’re looking at a cool wallet, a non-concentrated hot wallet, or a host hot wallet, it’s worth looking at customer ratings and reviews, especially those that say about the provider’s customer service. Are