What types of cryptocurrency wallets exist
Keeping one’s bitcoins safe from prying eyes, malicious bots, hackers and common thieves is not easy. It seems like everyone wants a nest egg of bitcoin these days. especially if you invested in bitcoin in the early days and someone knows about it, then they know that you still have your investment with you, and that you are literally sitting on top of a fortune. Not to sound sinister, but it is just a sad fact of
life that some people are willing to do anything for money or, in this case, for bitcoins.
There are many ways to keep your precious cryptocurrency safe. Just like physical money, you can store different amounts of bitcoin in different types of wallets. Some are called “hot” wallets, while others are considered “cold” wallets. In this guide you will find out more about these types of wallets as we examine them.
It is important to remember that when we talk about “keeping bitcoins safe,” we are actually referring to the safekeeping of the “private key.”
Within the wallet, bitcoins have an associated address, and each bitcoin address is composed of a “public key” and a “private key.”
What is a cryptocurrency wallet?
A cryptocurrency wallet is an application that acts as a wallet for cryptocurrencies. It is called a wallet because it is used similarly to a wallet in which you put cash and cards. Instead of containing these physical objects, it stores the access keys used to sign cryptocurrency transactions and provides the interface that allows access to cryptocurrencies.
Difference between private key and public key
The public key is the bitcoin address itself and can be shared with anyone. The public key can be compared to an e-mail address. Anyone who knows your e-mail address can send e-mail to you.
The private key is analogous to an e-mail password. Without a password, no one can read your e-mail. Similarly, without the private key, you cannot make a transaction to send bitcoin to another user. For this reason, it is extremely important to keep the private key secure.
So“If hackers somehow get hold of your private key, they can send ALL of your bitcoins or whatever cryptocurrency is in your wallet to their own accounts. “
Recover crypto sent to a wrong address
Because of the way bitcoin is designed, there is no way to know where bitcoins are sent, and there is absolutely no way to recover bitcoins sent. Bitcoin’s most attractive features, such as near-instantaneous transfers, anonymous and irreversible transactions, are also its biggest concerns in the event of private key theft.
Once your bitcoins have been stolen and transferred to another user, you have no choice but to accept the fact and move on. There is nothing else you can do; the only way is prevention.
So let’s see how to keep your private keys and bitcoins safe from hackers and thieves.
Guide to the different types of crypto wallets
A cryptocurrency wallet is a software program or physical device that allows you to store cryptocurrencies and send and receive cryptocurrency transactions. A cryptocurrency wallet consists of two key pairs: the private key and the public key. The public key is derived from the private key and serves as the address to send cryptocurrencies to the wallet.
What are the 5 types of cryptocurrency wallets?
The easiest way to start using bitcoins or any other cryptocurrency is to get an online wallet. You don’t even have to have bitcoins to get your own wallet. You can simply go to sites like Blockchain.info, Coinbase.com and other bitcoin exchange platforms to create your first wallet.
Online wallets are ideal for those who are just getting into bitcoin and for those who do not yet have a clear udea of what cryptocurrencies are.Binance is a great choice for storing your bitcoins online, also read this guide about the Binance earn program, and the tools it offers to start making passive gains – Binance earn, guide to tools offered
They are easy to set up, are very convenient, and can be accessed from anywhere with an Internet connection. Online wallets are “hot wallets” for this very reason: anyone can access your wallet!
Indeed, the worst thing is that most web wallets store private keys on their servers, so if the platform is hacked, your bitcoins are virtually lost.
Similarly, if a major technical glitch occurs on the site, your private keys could be compromised or completely gone. There is also the very real threat of having your account restricted or suspended from the platform. You could unknowingly go against the site’s terms of service or something similar, and they could close your account and your private keys forever.
If you have a significant amount of bitcoins, it is best to move them to a more secure “cold” wallet that is not connected to the Internet. Not having control over your bitcoins is a scary thought that should not be considered.
Although online wallets have inherent risks, it is not all bad, especially if you make frequent transactions. You can keep some bitcoins in your online wallet for regular transactions and keep the rest in a more secure wallet.
This way you can still experience the convenience of an online wallet and have the peace of mind of knowing that a large percentage of your bitcoins are safe.
Just like online wallets, smartphone app wallets are also “hot” wallets in that you can easily access your bitcoins wherever you have an Internet connection. Of all the wallets featured in this guide, mobile wallets are the most convenient. They may not be the most secure, but no one can deny their convenience.
You can send bitcoin payments to any merchant online or offline. Some web wallets have a mobile counterpart. For example, both Blockchain.info’s mobile wallet and Coinbase’s mobile wallet are synchronized with web wallets, which is really very convenient as both wallets automatically synchronize, so you can see your balance when you log in or access either wallet.
This convenience is precisely why more local businesses should accept bitcoin payments. The bitcoin community is growing at an exponential rate, and these savvy users are installing mobile wallets on their iPhones and Android smartphones.
There is probably no easier way for users to pay than scanning the QR code of your bitcoin address and hitting the Submit button to pay for your products or services!
However, not everything is positive with mobile wallets. For example, your private keys can be accessible to hackers, whether they are stored on a third-party server or on your cell phone.
If you lose your mobile device or it gets damaged, you could also lose all your bitcoins and other cryptocurrencies if you have not made backup copies of your private keys or stored them in a safe place.
The best way to take advantage of a mobile wallet is to transfer only what you need from a more secure wallet (such as a hardware wallet) to the mobile wallet. That way, even if you lose your phone and cannot recover your private keys, you will not lose all your cryptocurrencies.
The third type of wallet that can be used to store bitcoins relatively securely is a desktop wallet. This is basically a computer application in which private keys are stored. The most popular, though not always the most practical, is Bitcoin Core.
When you install the software, you need to make sure you have more than 300 GB (or more) of free disk space, because it will automatically download the entire blockchain dating back to 2009! because Bitcoin core uses technology (Full Payment Verification)
You cannot not download the blockchain, because Bitcoin Core will not process any transactions if the entire ledger has not been downloaded to your system
Once downloaded, you can start sending and receiving bitcoins in your wallet.
If you do not have a lot of disk space available, nor the bandwidth to download such a large file, then there is good news for you: Bitcoin Core is not the only desktop wallet available these days. In fact, you have many choices to choose from, such as Electrum, Bither, Armory and others, which do not require you to download the blockchain because they use Simple Payment Verification (SPV) technology.
Desktop wallets are relatively easy to use and are more secure than a web or mobile wallet because you only need to disconnect your computer from the Internet to prevent hackers from entering the system and stealing private keys.
Difference between Full Payment Verification and Simple Payment Verification
Full Payment Verification i.e., payment verification in its entirety, requires a full copy of the blockchain for wallets. They can verify that the bitcoins used in a transaction came from a mined blockchain by scanning the blockchain backwards, transaction by transaction, until they find the source.
In contrast, Simple Payment Verification (SPV) technology is a method that allows much lighter software to verify whether a transaction is on the Bitcoin blockchain without having to download the entire blockchain. The (SPV) client only needs to download the block headers, which are much smaller than full blocks. An SPV client requires a Merkle branch as a proof of inclusion to verify that a transaction is included in a block. Compared to web wallets, SPV clients offer greater security.
It may seem strange to you to store your digital cryptocurrency in a paper wallet. You probably wonder why someone would do this if bitcoin does not physically exist.
Bitcoin and paper might not seem like a perfect match, but if you think about it, they actually are. At least on some level.
Paper wallets are a form of “cold wallet” because Internet hackers will never be able to break into your little piece of paper. There are many skilled hackers who can find a way to access most computers and servers, but we’re pretty sure paper is not one of them.
Your bitcoins may be safe from hackers, but not from offline thieves. If you do not take care of your paper wallet, if you leave it lying around in unsecured places, then you are literally giving someone the keys to your wallet!
Water is also something to consider when using paper wallets “paper wallets” . Storing your wallet in water-resistant containers should help overcome this problem.
Paper wallets are not as convenient as mobile or web wallets, but they are certainly more secure. You can print your public and private keys and hide them in a safe place such as a safe deposit box.
Paper wallets are the best type of wallet for storing private keys for long periods of time.
If you do not plan to touch your bitcoins for months or years, you can create paper wallets.
Of course, as we have recommended in previous sections, it is best to keep some bitcoins (only those you can afford to lose) in more convenient wallets so that you can continue to send and receive bitcoins. The rest of the private keys can be kept in the paper wallet.
The Bitcoin community agrees that hardware wallets are the most secure Bitcoin wallets and that every serious Bitcoin investor and enthusiast should consider purchasing them. Unlike the other types of wallets we have covered so far in this guide, hardware wallets are relatively expensive.
Of course, if you have a substantial number of bitcoins to protect, it really is a small price to pay to keep your fortune safe. Most hardware wallets support a range of cryptocurrencies, so if you have also invested in currencies other than bitcoin, you will find this type of wallet a great buy.
Hardware wallets are basically powerful, durable USB sticks that plug into your computer when you make a bitcoin or cryptocurrency transaction. When finished, simply remove the wallet and store it in a safe place.
A unique security feature of hardware wallets is their ability to generate private keys offline, which means they are less vulnerable to hacker attacks. These small, robust devices allow people to take their private keys with them anywhere without fear of exposing them to the outside world.
Configuration is also quick and easy with hardware wallets. Depending on the wallet, you can assign a PIN code, password, fingerprint (if the wallet has a fingerprint reader) or recovery keyword to be used to authenticate access and recover bitcoins if the wallet is lost or destroyed.
In case you get amnesia and forget your recovery data, you should write down your secret data and hide it in a place only you know. Otherwise, if someone finds it, either by accident or on purpose, your bitcoins and any other cryptocurrency you have in there will soon be lost.
Hardware wallets are excellent for storing all cryptocurrencies securely. Whether or not you have a substantial collection of digital currency, you will never have to worry about your wallet being hacked and your money being stolen.
Private keys are relatively secure. You just have to make sure that your memory never leaves you and that you always remember where you have hidden your wallet backups!
To sum up this guide, the best wallet for bitcoin and cryptocurrencies is actually a combination of several wallets. Use hard or paper wallets for long-term storage, desktop wallets for medium-term storage, and web and mobile wallets for short-term storage and frequent transactions.