Are you new to cryptocurrency? Well, this is an industry that has grown rapidly over the past few years. Bitcoin has been the main subject when it comes to this topic, and rightly so. It’s the most common cryptocurrency and is already being used in many parts of the world. You can use it to buy products and services online, but not all stores accept it yet. Other countries, have in fact, banned the use of this digital currency within their boundaries.
Now that you already have an idea about this virtual currency, it’s time for you to take a look at Bitcoin wallets. What are they and how do they work? By definition, a Bitcoin wallet is a platform through which two parties can transact their digital currency.
Here is all you need to know about Bitcoin wallets:
They Don’t Hold Bitcoins
Contrary to popular belief, Bitcoin wallets do not hold your Bitcoins in a traditional storage sense. What’s stored in this type of wallet is basically a private key that corresponds to the Bitcoin address of your wallet. In fact, you don’t own whatever Bitcoin balance showed on your app. The balance you see in your wallet is simply the remaining value of Bitcoins you can still transact.
So, where are your virtual coins then? Well, all Bitcoins always exist in the blockchain, a system where all Bitcoin transaction records are maintained across a network of computers. Your purchased Bitcoins will always be safe as long as you store your private key well. According to CoinTippy.com, there are many Bitcoin wallets for Android you can try today. Other available types include online software, hardware, desktop, and paper wallets.
Bitcoin Wallets Have Two Keys
The concept of Bitcoin wallets revolves around private and public keys. Like a bank account, every Bitcoin wallet has a unique address that’s used during transactions. It’s a string of numbers and letters that distinguishes one account from the other. Of course, anyone who’s an expert in this field can create one for themselves by generating private and public keys.
It’s important to note that these keys are generated through asymmetric cryptography. What this means is that they are mathematics linked to each other, and you can derive the public key from the private key. However, you cannot do the reverse (public to private), which is what makes the whole process very secure.
The public key becomes your wallet’s address while your private key is the proof of ownership. Therefore, the security of your Bitcoins is largely dependent on how safe you store your private key.
Transactions Create The Identity Of Bitcoin Wallets
Your bank has a list of all accounts that exist in its platform. Therefore, your bank account is known to exist immediately after you create it. On the contrary, when you create a Bitcoin wallet, you’re the only one that knows about it until you make the first transaction. Therefore, without any transaction, your wallet will only exist in your computer.
Offline Bitcoin Wallets Exist
Whenever Bitcoin wallets are mentioned, the first thing that comes to mind is an online software or a program connected to the Internet. Well, those are the most popular types of e-wallets available today. However, there are others that not many people know about, and they offer the same services. The difference is that offline Bitcoin wallets prioritize security over convenience. Since these are not consistently connected to the Internet, they’re not prone to hacking attacks.
- Paper wallets: As the name suggests, these are printed out and stored as hard copy. The printout has both public and private keys in the form of QR codes. Therefore, whenever you want to do a transaction, you’ll need to scan those codes first.
- Hardware wallets: These involve the physical storage of your private keys on a digital device. These are always offline, but can be connected to the manufacturer’s website whenever you want to do a transaction. As such, they never reveal your keys to the public. These hardware devices have pin locks, which act as the initial layer of authentication.
Bitcoin wallets have been around for years now, but not many people know what they actually mean. These e-wallets store private and public keys that one uses during transactions. Once you create your Bitcoin wallet, you’ll need to make a transaction before it can be seen by other people. You can choose to have an offline or online Bitcoin wallet. However, keep in mind that the latter prioritizes convenience over security.