A wallet is a pouch where you can keep your personal belongings, especially money. We are well acquainted with digital wallets or e-wallets that we can use for cashless transactions using an electronic device (through a computer or a mobile phone). Bitcoin is a digital currency that is not regulated by any central or governmental authority like other FIAT currencies.
The e-wallet is linked with the user’s bank account to enable payments. Similarly, bitcoin wallets or any other cryptocurrency wallets are used to store digital/virtual currency.
Types of bitcoin wallet
Bitcoin wallets are secured using a private security code. These wallets can also be accessed using a computer or mobile through a website or application. A bitcoin wallet is analogous to a physical wallet that is used for the bitcoin trade. Crypto wallets are grouped into hot and cold storage wallets which are software and hardware wallets respectively.
1. Hot storage wallets
- Desktop wallet- You can access this using a computer where the wallet is installed and you have complete control over it. You can encrypt the wallet using a private security code. Desktop wallets work as your address from where you can carry out transactions to send and receive bitcoins.
- Mobile wallet- Mobile wallets are quite similar to desktop wallets that you can use anywhere just by a touch. These are more convenient to use as you can facilitate a bitcoin payment while in motion and from wherever you are just using a few taps. You can even make a payment by scanning a QR code. Bitcoin wallets are compatible with iOS and Android systems. Mobile apps sign up for free now can be used for transactions made using a mobile wallet.
- Web wallet- You can access web wallets on any browser or mobile phone. Some popular web wallet providers are Coinbase and Blockchain.
2. Cold storage wallets
- Hardware wallet- This is the most secure kind of wallet that you can use. Hardware wallets store bitcoins on a physical piece of device that is plugged into a computer using a USB port. Hardware wallets are secure as they are least prone to virus attacks or scams. One drawback of the hardware wallet is that you will need to buy these unlike other wallets and can be as expensive as 200 dollars.
Advantages and disadvantages of crypto wallets
- Ease of use- One of the major advantages is the easy process of opening a wallet. It is much easier to access as transactions can be made immediately after creating a crypto wallet.
- Variety of options- Several digital currencies can be stored in different wallets. Every different digital currency has its advantages and features.
- Security- The cryptocurrency wallets are well established with secured mechanisms to hold your data.
Alternative use of a bitcoin wallet
There are digital tokens that signify goods, financial assets, securities, and services. You can use crypto wallets to store keys for such digital tokens. Any application created on a distributed ledger requires you to have a wallet that you can use to sign transactions that work for that application. In the case of a bitcoin wallet, you can only send and receive bitcoins from another user. For a supply chain, you can sign a transaction that tracks the particular asset like electronic parts, raw materials, etc.
There is great potential in the global economy based on blockchain and crypto-wallets that can enable everything from individual financial functions, tax-related information to digital identities and application access. A digital form of traditional documents can also be stored in crypto wallets giving complete authorization to the users. Crypto wallets, in this manner, can become more important and a mode of keeping documents securely.