Bitcoin and other cryptocurrencies must be stored and traded through hardware or online bitcoin wallet.
Unsure where to start when it comes to trading cryptocurrencies like Bitcoin? A cryptocurrency wallet is the first thing you’ll need. Here are some answers to common questions about cryptocurrency wallets and how to choose which one is right for you.
Cryptocurrency wallets: what are they?
Bitcoin wallets and crypto wallets, also known as cryptocurrency wallets, work like traditional wallets except that they hold your digital assets instead of paper money.
Bitcoin or other cryptocurrencies can be acquired through a cryptocurrency wallet that stores both public and private keys and authorizes transactions. A digital wallet can be in the form of a device, an app or an online service, or a service from a crypto exchange.
To spend or trade cryptocurrency, you should keep your private key safe & secure, which allows you to access your crypto wallet.
Is it necessary to have a cryptocurrency wallet to trade Bitcoin?
Trading cryptocurrency may not require you to have your own wallet. A lot of cryptocurrency platforms offer storage options, which are essentially wallets that manage to store your digital assets. There are some advantages to this. You can use this method to reduce the possibility of losing information crucial to cryptography. In some cases, platforms may also pay incentives or rewards for keeping assets on their platform.
However, even though exchanges claim to ensure the safety of their users’ assets since so much of crypto is at stake, they can also pose a major target for hackers. If you wish to have full control over your cryptocurrency and its security, you may want to store it in your own wallet.
There are many different types of digital wallets and most come with password protection, two-factor authentication, and other security features.
The different types of Bitcoin wallets
For Bitcoin and other cryptocurrencies, a variety of digital wallet formats exist, each offering different advantages and disadvantages in terms of how easy they are to use for trading and security. In any case, you should safeguard the password that gives you access to your digital wallet, regardless of the format.
The two major categories of Bitcoin wallets are hot wallets and cold wallets.
Store Bitcoins in a hot wallet
Cryptocurrency wallets for hot storage are directly connected to the Internet, either through an app, desktop software program, or an online service provider (hence the term “hot” storage). The good news about these services is that they are all free, but the bad news is that they are linked to the internet, which could put them at risk of hacking.
The theft of cryptocurrency makes headlines, but in the truth, crypto exchanges and digital wallet providers appear to be doing a better job of combating this crime. A study by CipherTrace, an analytics and blockchain security firm, said that despite the growing popularity of cryptocurrencies, theft declined 57% in 2020.
However, feel free to keep your digital wallet safe, just as you would keep your standard wallet. Don’t let your digital wallet become a target for thieves.
A desktop wallet
A desktop wallet stores all your cryptocurrencies on your desktop computer and runs on your computer. An advantage of a desktop wallet is that you can access your funds at any time, so you don’t have to worry about losing funds to a third party. However, you are also responsible for security, so make sure your wallet is protected and backed up, and your computer is malware-free.
There are several desktop wallets commonly used, including Atomic Wallet, Bitcoin Core, BitPay, Electrum, and Exodus.
A mobile wallet
Mobile wallets let you store and manage your Bitcoin funds through apps on your smartphone. The most convenient way to make quick payments with a mobile wallet is with an iOS or Android device. QR code payments can also be made with these devices. In the same way as desktop wallets, you’ll need to back up your device in order to protect your digital cash.
Bitcoin Wallet, GreenAddress, and Mycelium are a few wallets with mobile versions as are Atomic Wallet, BitPay, and Exodus.
In web wallets, you can use both desktop and mobile devices to access your wallet, but you don’t have as much control as other wallet methods. Brokerages that offer cryptocurrencies, like Robinhood, and exchanges like Coinbase provide users with web-based wallets.
Bitcoin cold storage wallets
You can download and carry your Bitcoins and other cryptocurrencies with a cold wallet, which is a small, encrypted device.
Since the money is stored offline – hence the term “cold wallet” – these wallets can cost up to $100, but are considered more secure than hot wallets since they are offline.
Providers of cold wallets include:
- Trezor: They make cold wallets with the size of keys ranging in price from $60 to $200.
- Ledger: This cold wallet is designed like a thumb drive, ranging from $60 to $120
What is the best Bitcoin wallet for you?
A combination of cold wallets and hot wallets for cryptocurrency traders with large amounts of cryptocurrency assets is recommended in order to protect their cryptocurrency resources.
The best rule of thumb is never to trade or invest more than you can afford to lose. Assets such as Bitcoin are considered extremely volatile.