What Is A Bitcoin Wallet?
What is a Bitcoin Wallet?
The Bitcoin wallet is where you keep your Bitcoins, trade and sell
Bitcoins and other digital cryptocurrencies, so make sure you know
everything there is to know about what kind of wallet you get:
Mobile wallets, Web wallets, Desktop wallets, Paper wallets,
Brain wallets, HD wallets, Multisig wallets and of course Hardware wallets.
A Bitcoin wallet is a program used to send and receive Bitcoins,
store Bitcoins and monitor Bitcoin balances.
Wallets interface with the Bitcoin Blockchain, the global ledger
of bitcoin transactions all over the web, this is why transactions take so long,
all the wallets have to ackowledge the transaction and it has to add up to what the Blockchain Algorithm computes.
What defines a wallet is it’s private key, the private key is a very long
string of numbers and letters that acts as the password to your Bitcoin wallet.
It’s from this number that your wallet gets its power to send your Bitcoins to other people.
You can also think of it like a pointer for locating your Bitcoins.
In other words, whoever knows your private key has control over your Bitcoins.
So it is very important to SAFE GUARD YOUR PRIVATE KEY!
The private key is also used to generate your Bitcoin address, this is what is given to send or
receive bitcoins for buying and selling. Even though the Bitcoin address is generated through
the private key, there’s no way figure out what the private key is just by examining a Bitcoin address.
So it’s safe to give out a generated Bitcoin address for transactions.
The main function of the wallet is to Collect & Store Cryptocurrencies and use the Private key for generating Bitcoin addresses for transactions. Your wallet does all the complex work for you.
As Bitcoin wallets evolved HD wallets, or hierarchical deterministic wallets,
were created. HD wallets generate an initial phrase known as a seed or mnemonic phrase. This seed is a string of common words which you can memorize instead of the long confusing private key.
If something happens to your wallet, you can use the seed/mnemonic phrase
to reconstruct the private key, and HD wallet can create many Bitcoin addresses from the same seed. All of the transactions sent to addresses created by the same seed will be part of the same wallet.
Therefore it is vital to protect your private key, failure to do so, can result in you losing everything!
When a standard wallet is created, a wallet.dat file is made, this file should be backed up to a safe place like a external drive, writing it on paper, etc.
HD wallets creates a seed phrase with up to 24 words, this seed phrase should be kept in a safe place.
Types Of Wallets:
Full Node Wallet: hold a full copy of the Blockchain in order to validate each and every transaction.
SPV (Simplifived Payment Verification): don’t hold a full copy of the Blockchain. They rely on full
nodes that they are connected to in order to validate transactions.
Hot Wallet: This wallet is contected to the internet or web service, Hot wallets are very popular, and considered
the least secure because of their liability to be hacked, also you don’t have access to your private keys,
you are trusting the site you signed up for the Hot Wallet to hold your private key for you.
The Vulnerbility is with in your interaction with your Hot Wallet, your private key can be monitored from unsecure
connections like public WiFi’s, so be very careful if you’re planning on getting a Hot Wallet, protect your self with
2-Factor Authenticators like Authy or Google Authenticators. As a rule, never keep your cryptocurrency in an exchange
Desktop Wallets: This hot wallet stores your private key on your computer, you should invest in the best Anti-virus,
Malware, spyware software to keep your private key safe, also store it in an encrypted drive/folder; hackers will
still target you, so getting a VPN is also recommended.
Mobile Wallets: Are convenient, but not the best, phones can be lost, your number and geo-location is available
to hackers, apps can be hacked and offer loop holes, again you should use the 2-Factor Authentication, and in
tandem with hardware wallets/cold storage wallets.
Cold Storage Wallets:
Cold storage wallets are the most secure (most expensive) wallets you can get, they are not connected to the internet
100% of the time, and used only when you need to make a transaction, therefore virtually hack proof; examples are:
Hardware wallet, Brain Wallet, Paper Wallet…
Hardware Wallet: Are physical devices (secure USB Sticks) which store your private keys, which can’t be hacked even if
compromised by malware. They can be used on public computers and provide you with a backup in case of a mishap.
Brain Wallets: Are the use of private keys created from a set of words, so instead of a generated seed, you decide
yourself on a phrase and the use of an algorithm generates a private key from the phrase you chose.
Because most people are predictable in their use of passwords, Brain Wallets can be hacked, which is a disadvantage.
Unless you use a 25 letter number letter combination, don’t use Brain wallets.
Paper Wallets: Are pieces of paper with oyur seed/private key written on them. Keeping your private key on paper means
someone has to physically access that paper to access your bitcoins. Paper wallets can be lost, stolen, or destroyed
and should be safe guarded if used.
Multisig Wallets: Multisignature wallets are 3 keys assigned to 3 different people, in order to use them, you need any
2 keys to authorize access to your Bitcoins, groups and cooperations use this type of wallet.
Choosing a Wallet???
Never keep all your eggs in one basket!
I like to keep large assets of cryptocurrencies in hardware wallets, and smaller amounts in mobile wallets
for quick purchases (yes you can use Bitcoins to buy stuff, and there are Bitcoin ATM’s for money withdrawal too).
You have to decide what’s best for you (After educating your self Hint: https://litecoins101.com/Trade Secrets)
as to what wallet you get, in general you may want more than 1 wallet, but educating yourself is the key.
Here are some suggetions:
Cryptocurrency Secrets Training Program
Trade with Coin Base
Bitcoin Rush, Learn everything you need to know about Bitcoins
Bitcoin Pro Signals, know when to buy and when to trade
Learn how to invest in Bitcoins
https://litecoins101.com/Get Started With Bitcoin
Get Started with Bitcoins