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Bitcoin Wallet: What It Is, Types, and Tips to Keep Your Wallet Safe
With the rising popularity of Bitcoin, the number of crypto wallets has increased significantly. And so has its demand. New users are joining the Bitcoin ecosystem in leaps and bounds.
If you want to start your Bitcoin journey, the first thing you need is a Bitcoin wallet. With so many options out there, choosing a perfect wallet can be intimidating. Not anymore. In this blog, we will explain different types of Bitcoin wallets, their functions, how they work, and how you can sign up for one. Let’s get going.
A Bitcoin wallet allows its users to send/receive payments through the Blockchain, either via software application or specialized hardware device. Unlike traditional wallets, which store money, a Bitcoin wallet doesn’t store Bitcoins. Instead, it acts as a bridge between the user and their holdings, which “live” on the blockchain. Think of them as gateways to the blockchain.
With a wallet, users can view and manage their Bitcoins and initiate transactions. The primary function of a Bitcoin wallet is to securely store the user’s private key, which is required to transact on the Blockchain. Any wallet that exists has two keys: one private and one public. While they both look like long alphanumeric strings, they have different functions.
An example of a private key:
E9873D79C6D87DC0FB6A5778633389F4453213303DA61F20BD67FC233AA33262
An example of a public key:
1Lbcfr7sAHTD9CgdQo3HTMTkV8LK4ZnX71
Think of it this way: a public key is like your wallet address; it works in a similar fashion to a bank account number. You can share your wallet address with anyone who wants to send you Bitcoin.
On the other hand, a private key is like your ATM PIN. It is used to initiate transactions. Anyone who has access to your private key will be able to control your funds. Wallets help you store your private key securely so you don’t accidentally share it with anyone.
Several types of wallets exist, from user-friendly web wallets to complex and relatively more secure hardware wallets. They are all designed to safeguard your private key. Let’s look at the most popular wallet types and understand the difference between them.
Bitcoin wallets can be broadly classified into two types: custodial and noncustodial. In a custodial wallet, your private keys are stored by a third party, which could be a Bitcoin Wallet company or a crypto exchange. Noncustodial wallets allow you to take responsibility for securing your keys.
Custodial and noncustodial wallets can be further divided into hot and cold wallets. Simply put, a hot wallet is connected to the internet, and a cold wallet has no connection.
Bitcoin wallets can be further classified into different types based on their features and characteristics. They have three main subcategories: software, hardware, and paper. So you can be using a custodial hot wallet — which is always connected to the internet and managed by a Bitcoin wallet company like Speed. Or, you can use a cold, noncustodial wallet — which allows users to store their sensitive information offline. A good example of a cold noncustodial wallet would be the Ledger Wallet. Let’s look at each type individually.
Software wallets generally come as applications for desktops and mobile devices. They can be easily installed on different operating systems and various devices. Users can initiate Bitcoin transactions through a software wallet, view their balance, and much more.
Most software wallets are connected to the internet and built for mobile operating systems like Android and iOS. They can use a mobile’s native features like camera and biometric authentication for easier payments and better security.
Speed Bitcoin Lightning Wallet is a software wallet compatible with Android and iOS. The app can be downloaded for free from the Google Play Store and Apple App Store. Once the setup is complete, you can send and receive Bitcoins to anyone, anywhere, with zero transaction fees.
Hardware wallets are plug-and-play devices that resemble a USB drive. You can safely store your private keys in a hardware wallet and carry them anywhere. To initiate a transaction, simply connect your hardware wallet to your device or computer. Once the transaction is through, you can unplug the wallet from your device; doing so will disconnect you from the internet, making it less vulnerable to online threats.
Hardware wallets can range between $100 to $200. Ledger and Trezor are two of the most popular hardware wallets on the market. Such wallets are usually not connected to the internet until plugged in. Thus, they can be considered as cold wallets.
In earlier days, people used to write/type their private keys on paper and thus the name, paper wallet. Gradually, they started storing keys in the form of QR codes so mobile wallets could scan them. While paper wallets are one of the most secure ways of storing private keys, they are vulnerable to theft or loss. Thus, most users eventually switched to software/hardware wallets for better security and safety of their funds.
Keeping your wallet safe is extremely important, as Bitcoin is one of the most valuable cryptocurrencies on the market. Here are the top 3 tips to keep your funds safe:
Ensure that your wallet has enough experience in the industry and a good track record. Read reviews on various platforms like G2, Trustpilot, and GoodFirms to see if they are reliable enough to be trusted with your funds. You can also check app reviews on the Google Play Store and Apple App Store to learn about their app experience.
For instance, Speed is one of the top-rated Bitcoin Lightning Wallets on the Play Store and App Store. Don’t believe us? Try it yourself. Download the Speed app to experience blazing-fast Bitcoin transactions at zero transaction fees.
If you are using a hardware wallet, it is crucial to back it up on a regular basis. In case your computer fails, you will only be able to recover your funds if you have regular backups stored securely on a separate device. If possible, maintain multiple backups on a USB, hard drive, CD, or other removable storage device.
As Speed is a custodial wallet, we will take care of your private keys so you don’t lose them ever. In case you lose access to your account, there are multiple ways to regain its access.
There are several security measures you can take to keep your wallet secure. Create a strong and unique password. Statistics show that 52% of people reuse the same password across different services. Avoid using date of birth, phone number, and name as your wallet password. Instead, use alphanumeric combinations and enable biometric/facial recognition to lock your wallet.
If your app supports 2-factor authentication, make sure you enable it. That will prevent any unauthorized access to your wallet. Last but not least, update your app regularly. Most companies enhance their app’s security and add new features with every new release. Running your app on a lower version may make it vulnerable to online threats.
Picking the right Bitcoin wallet can be daunting. If you are looking for a robust Bitcoin wallet that supports both on-chain and lightning transactions, Speed is for you. It is easy to use, highly secure and levies zero transaction fees.
Speed Bitcoin Lightning Wallet is a top-rated app on Google Play Store and App Store. We are constantly working to improve the app experience and make peer-to-peer transactions easy and accessible to anyone, anywhere.
Speed Wallet app is available for Android and iOS. Download now to experience flawless Bitcoin transactions anywhere, anytime.
Introducing Speed Wallet's Chrome extension. Easily manage Bitcoin transactions directly from Chrome for faster, hassle-free payments. Learn more on our blog.
Speed Wallet's Web App is here! Easily manage your Bitcoin and make secure online transactions directly from the web. Try it now for seamless digital wallet management.
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