Bitcoin wallets are the virtual digital wallets that allow its users to easily send and receive bitcoins. While looking at different types of wallets, it becomes a bit difficult to choose the best wallet according to requirements and needs. There are a plethora of factors that must be taken into consideration while choosing the bitcoin wallet.
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Summary of Bitcoin Wallet
A bitcoin wallet is an intangible program or device that stores bitcoins and allows the users to interact with the underlying technology of bitcoin, blockchain. Before you get into investing bitcoins, learn the difference between wallets in terms of security features, convenience, accessibilities, and more. Gain knowledge on how to carefully store the private keys.
In simple words, a private key is a string of letters and numbers that are similar to passwords used to protect bitcoins. A private key is a secret combination that protects your bitcoins in the wallet and is used in sending bitcoins to another bitcoin address. The most important fact to understand is that the one who has the private keys has full control over bitcoins.
Another important aspect of the bitcoin wallet is the bitcoin address that can be generated using a private key. The primary function of the wallet is to create, store, and use the private keys. The private key allows the users to interact with the blockchain, and it automates the complex cryptography of bitcoin.
Difference between Custodial and Non-Custodial Wallets
Although people know the wallets from its different types, it basically has two categories that include Custodial and non-custodial wallets. When we talk about a custodial wallet, it is more like a bank account of today’s time. Like the traditional currencies are stored in bank accounts, a custodial wallet stores the bitcoins but doesn’t own these coins.
When we put a glance on non-custodial wallets, these are the wallets that are complete for the user. The wallet user is the sole owner of his wallet and the private keys. No other person has access to private keys or bitcoin address of non-custodial wallets.
A phrase is set by the Bitcoin community, which states that “if keys are not yours, it’s not your bitcoins.” This indicates that if any time by mistakenly, you lost your wallet, then the one who has the wallet is the owner of bitcoins. This is the biggest reason why people chose custodial wallets to keep private keys in their hands and secure bitcoin wallet appropriately.
How to choose the best bitcoin wallet?
Each and every person has different needs and requirements, and every person tends to choose a wallet according to his needs. There are two different types of wallets, which include cold storage and hot wallets.
All wallets vary in terms of convenience and security, and before choosing one, there are some questions that you must study.
- What is the fee or charge of buying the wallet, and can you afford it or not?
- How will you carry the bitcoin wallet with you while traveling or going out?
- How will you safeguard your bitcoin wallet to protect it from the access of hackers or fraudsters?
- What safety measures should you take?
How to backup your bitcoin wallet?
The seed phrases and private keys control and power your bitcoins; it is imperative to keep these two secure. You will lose all your bitcoins if you lose control of private keys or seed phrases. The bitcoin wallets usually create a wallet.dat file, which contains the private key. The users can backup their wallets by copying the file on other locations like a flash drive or an encrypted device.
Some common ways that hackers try to steal bitcoins
With the motive of stealing the funds of the user, the most common way that hackers choose is to introduce a new wallet that users intend to download and install. Actually, there is no way that can depict that the app or software is malicious, and you must not download it. You must only download the apps or software that is open source and have a good reputation in the bitcoin community.