A Digital wallet is an electronic device that allows you to make online transactions.
A digital wallet has become reality nowadays; you can use digital wallets to purchase or make online and payments. There are many digital wallets available online, however, Bitcoin wallets have become immensely popular these days. So, let's find out what actually this Bitcoin wallet is?
A Bitcoin wallet is similar to a bank account. It contains all feature of a bank account. Using wallet, you can receive Bitcoins, store them and send them to others. Bitcoin wallet offers a great security; hence, one should not be anxious about the security threats. There are mainly two types of digital wallets:
- Software Wallet
- Web Wallet
A software wallet can be installed on a personal computer or mobile phone. In this wallet, you have full control on the security of the coins, but sometimes it is difficult for you to install and maintain this wallet. On the other hand, a web wallet or hosted wallet is handled by a third party. It is easy to use this kind of wallet as it offers a high level of security to protect your coins. However, you have to trust service providers for providing security to your coins.
Apart from the above-mentioned Bitcoin wallets, some other wallets that are highly popular include:-
Hot Wallet Vs Cold Wallet: All wallets are classified either under a hot or cold category. A hot wallet is connected to the internet. On the other hand, a cold wallet is an offline wallet or a wallet which is not connected to the internet.
Talking about the security and usability, a cold wallet is more secure and frequently used, whereas a hot wallet is used to access funds instantly. Therefore, a hot wallet is better for regular usage and cold wallet is used to fulfill long-term needs.
Desktop Wallets: This type of wallet can be installed on the personal computer or laptop. This type of wallet is easy to access and use even when the system is not connected to the internet.
Mobile Wallets: If you are a frequent mobile user and have o time to access your desktop or laptop, then you can install Bitcoin mobile wallet on your smartphone. There are several Bitcoin wallets available online for both Android and iPhone users. Talking about the most important feature of the mobile wallet is the QR code capability that enhances the security of making transactions online.
Paper Wallets: Paper wallets are more secure compared to the other online and software wallets. It is easy to store a private or public key on the paper. The reason why it is more secure is that you have your keys printed on a piece of paper. Paper wallet falls under the cold storage method (offline method). However, sometimes it is difficult to manage a paper wallet as it can be easily misplaced or torn or damaged. Thus, instead of having a single copy of the keys, it is recommended to create four-five copies of the key and store it in a safe place.
Hardware Wallets: Hardware wallets are a different type of wallet. They are standalone hardware cold storage device that is responsible for storing keys. Hardware wallets are USB type devices that one needs to attach to his/her computer or laptop for making any transaction. A hardware wallet is highly secured as it stores keys offline. As the keys are generated offline, therefore, it protects user’s keys from malware or hackers attacks. It is extremely easy to use a hardware wallet and one don't need to understand the complex mechanism of blockchain or Bitcoin. Overall comparing to other available wallets, it is one of the most secured Bitcoin wallet options.