Buying, selling and trading bitcoin has become available, but the next step that comes up is regarding its storage, according to Cointelegraph. Since bitcoin is a digital currency, it is stored in an electronic wallet that can be entered via a private key. A wallet application automatically ensures the use of a private key to sign outgoing transactions and generate wallet addresses.
According to the publication, digital wallets store cryptographic information necessary for bitcoin-based transactions, while other cryptocurrencies can also be stored in them. The steps required to choose the right bitcoin wallet is to determine the type of cryptocurrency wallet required and then choose the ideal individual wallet. It is important to ensure that the chosen wallet is compatible with stored currencies and meets specific security and user-friendliness requirements. Different types of bitcoin wallets are:
Mobile wallets help in the use of bitcoin to make payments for goods and services in stores or to make day-to-day commerce-oriented transactions. It runs as an application on smartphones, to store private keys and allows one to pay, trade and store cryptocurrencies with the phone. Mobile wallets benefit from payment verification technology, as they only operate on subsets of the blockchain that rely on nodes in the bitcoin network to ensure they have the correct information. The downside lies with nodes that have control over coins and transactions. Mobile wallets are vulnerable to malware and hacking. You can lose control if someone gets access to your mobile, and there is no two-factor authentication.
Online wallets (exchange wallets)
Online wallets store private keys on a server that is online and controlled by a third party. These wallets enable users to access money from any Internet-connected device. Exchange wallets have been targeted by hackers as they are accessible through one’s email address and password. In some situations, they offer a degree of security against the loss of funds.
Desktop wallets are downloaded and stored on one’s computer to store private keys on one’s hard drive or solid-state drives (SSD). They do not rely on third parties, but are connected to the Internet, which raises concerns about their security. Desktop wallets are suitable for those who trade small amounts of bitcoin from their computers.
Hardware wallets store private keys on a physical device. They are immune to computer viruses, as the funds stored cannot be transferred from the device in clear text, and their software is open source. Most hardware wallets have screens as a security feature, to verify and display wallet details. Hardware wallets purchased from any used marketplace are considered fake and can steal money from one’s bitcoin account.
Paper wallets are physical documents that contain public addresses for receiving bitcoins and a private key that allows one to use or transfer the bitcoins stored in that address. Paper wallets are printed in the form of Quick Response (QR) codes, to scan them and add keys to a software wallet or wallet program to perform transactions. A paper wallet can be created through services that allow users to create a random bitcoin wallet address with its private key. The advantage of paper wallets is that keys are stored offline, which makes it resistant to hacking attacks including malware. One must make sure not to be mapped while the wallet creation is taking place.
(With insight from Cointelegraph)