If you are still new to the crypto world or you have not yet invested in bitcoin , then you may not be aware of the meaning of a bitcoin wallet . Well, people often purchase bitcoins on crypto exchanges like Binance or Coinbase and hold that asset on their crypto exchange platform. This rookie mistake shouldn't be made!

Owning your bitcoin is the best way to secure it. By doing this, you will never have to worry about your financial situation being less than what you're told by a bank or exchange. 

Bitcoin wallets are available in several forms, each catering to different requirements and offering different features such as security, convenience, and accessibility. Decentralization is at the forefront of full-node wallets, and there are also mobile wallets that provide features such as cryptocurrency exchanges and QR code scanners, among other functions, depending on the wallet you use. 

You should choose a wallet that works with the currency you store and is secure and convenient for you.

Types of Bitcoin Wallets

Mobile

A mobile crypto wallet is an indispensable tool for Bitcoin users who pay for goods in shops or make face-to-face trades on a daily basis. The app runs on your smartphone and stores your private keys, allowing you to use the phone to pay for things, trade, and store crypto.

The smartphone's NFC capability is also commonly used in some apps, so users can simply tap their device against the terminal without having to provide even a single bit of information.

Due to their focus on a smaller subset of the blockchain, mobile wallets can simplify payment verification technology. Because of this, they only work with trusted nodes within the Bitcoin network to ensure correct information. 

This presents an issue because trusted nodes control the coins and transactions, which is at odds with Bitcoin's trustless philosophy. Despite this, mobile wallets are required as a result of mobile phones' limited system resources, but that can also be a downside of their ease of use.

Additionally, mobile wallets are prone to malware and hacking as another byproduct of being convenient on-the-go solutions for Bitcoin storage. If your mobile device does not have two-factor authentication enabled, you can also lose control over your wallet if you simply share it with someone else. Logging in with two-factor authentication (2FA) entails entering a code in addition to your user name and password. Two-factor authentication is the process of sending you a code to your mobile phone or email address in order to verify that you are the user. The most secure way of getting 2FA is by using a second-factor identification app such as Google Authenticator, FreeOTP, or Authy, which is unaffected by SIM swap attacks or email tampering.

If you have a large Bitcoin holding, it is advised to set up a hardware wallet or physical wallet in addition to the mobile wallet.

For devices running Android and iOS, there are many wallet apps available. Wallets that calculate your balance without downloading the entire blockchain are light wallets that don't download the blockchain to your smartphone or tablet. Keep an eye out for counterfeit apps and scams. Your private keys can be stolen by a variety of people out there.

Web Wallets (Exchange Wallets)

Your private keys are stored on an online server controlled by a third party, which is constantly online. There are a variety of services that provide different features, some of which can be accessed via mobile or desktop wallets and replicate addresses across different devices.

The main use of e-wallets is to access their funds whenever and wherever they need them. They work much like mobile wallets. Your private keys can be obtained by the organizations running the website, allowing them to control your funds.

The majority of e-wallets operate via exchanges, and exchanges have shut down and taken users' money in the past. The email address and password used to access exchange wallets also make them popular targets for hackers.

Wallets on exchanges may offer some protection against the loss of funds - for example, insurance or backup funds to compensate users in the case of a hack. In addition to being a serious security risk, leaks of passwords and emails are very common because people may use the same email address and password across multiple accounts. Please keep in mind that your email address makes up half of your login credentials.

Desktop

Your computer's hard drive or SSD stores the private keys for desktop wallets after they are downloaded. Due to their lack of reliance on third parties, they are considered to be more secure than online and mobile wallets.

Due to their connection to the internet, they are inherently less secure. Despite that, desktop wallets are an excellent choice for small traders who trade Bitcoin using a computer.

You can pick a desktop wallet to suit your needs from a variety of options. Others focus on security, while others emphasize privacy, convenience, decentralization, etc. The blockchain is downloaded onto your computer when you run wallets as full nodes. There is a need for a fast internet connection and storage space of hundreds of gigabytes. But they also give you more detailed control over transactions than most wallets. This wallet can be beneficial for several reasons, including but not limited to:

  • Replace-by-fee checkbox: When you want your transaction to go faster, you can increase your transaction fee later.
  • The fee and speed are controllable by an intuitive drop-down box.
  • Performance: Rather than going through a third-party provider, transactions are broadcast directly to the memory pool.
  • API and CLI: With full node wallets, you have access to a wealth of controls not available in light wallets. By integrating this API into their apps, app developers can provide users with Bitcoin-related functionality. Also useful for building your own wallet application.

Hardware

Hardware wallets are unique because they are physical devices that store private keys securely. In theory, it is the best way to store Bitcoins of any amount. The advantage of hardware wallets is that they can be used securely and interactively, unlike paper-based wallets. Also, the software is usually open-source and protected by computer viruses; the data stored can't be retrieved in plaintext, and the funds stored cannot be accessed as plaintext.

Screens are an important part of most hardware wallets, as they can be used to display and verify wallet data. An example of such a screen would be one that generates a recovery phrase and confirms the amount and address of the payment you are making. Therefore, your funds will be safe and secure so long as you purchase an authentic device from a trustworthy and competent manufacturer.

A hardware wallet should never be purchased from an online marketplace that sells used items. Bitcoin and other cryptocurrencies can be stolen from fake hardware wallets. Make sure you are visiting the official website of the manufacturer when purchasing hardware wallets. Make sure your browser's address bar contains the correct URL.

Paper wallet

There are two parts to a paper wallet. One is a public address for receiving Bitcoin and the other is a private key for spending or transferring Bitcoin stored at the address. When you print a paper wallet, a QR code will be printed on it so you can quickly scan it and add the keys to a wallet app to make a payment. 

With services that enable users to generate a random Bitcoin address and private key, a paper wallet can be generated. Some services will allow users to order holographic labels that are tamper-resistant or imprinted with the generated keys.

Paper wallets are inherently resistant against hacking attacks, such as malware that records keystrokes, which can be exploited by keyloggers. This makes paper wallets highly reliable and completely immune to hacking attacks.

 It is still important to take some precautions when creating an electronic wallet. Making your wallet must be done secretly and no one should be able to see it.

Using a USB flash drive or DVD with a clean operating system, such as Ubuntu, is recommended to prevent spyware from tracking your activities. As an added consideration, the website code should be able to run offline once the paper wallet has been set up, allowing the user to disconnect from the internet before generating keys. Last but not least, use a printer that is not connected to the network.

In addition, it's very important that you realize that the paper you print contains important, private information. It is important to take certain steps to safeguard that document. Ideally, it should be stored in a dry, safe place in a sealed plastic bag to prevent water damage and general wear and tear. It is sometimes laminated and stored in a safety deposit box.

Physical Bitcoin

As long as the private key remains hidden, the value of physical Bitcoin coins is locked up as long as they are preloaded with a fixed amount of Bitcoin. In most cases, this is accomplished by using a tamper-evident seal.

While Bitbill was the original of its kind, subsequent alternatives were shaped like round medals. The first Casascius bitcoin was created in 2011 by cryptocurrency enthusiast Mike Cadwell, who goes by the nickname "Casascius." Keys were hidden under holograms that were peelable and left a tamper-evident mark when removed. The digital value of the coin was lost when redeemed. In the months since a number of new coins have been introduced, and some companies now offer preloaded cards packed with crypto.

As a result of the inherent limitations of physical currency, Bitcoin is now primarily used by collectors. Bitcoin's key value proposition is the ability to transfer money anywhere in the world seamlessly - physical coins would make this impossible. 

Bank

Bitcoin is often prohibited by banks, including the transfer of funds to cryptocurrency exchanges. Despite being clearly incentivized to suppress this service to protect their own business model, banks often refuse to provide this service on the grounds of money laundering. The reason for this is that Bitcoin is designed to eliminate the need for banks to act as custodians.

Those large traditional financial institutions that have not only developed their own cryptocurrencies but also provide custody services for cryptocurrencies such as Bitcoin have expressed an interest in cryptocurrencies in recent years. Bank custody services are also being regulated by regulators to enable them to provide the services to banks. 

In the case of Bitcoin, storing coins and wallet information securely on the blockchain might make banking redundant. Also, Bitcoin can be used for international payments without requiring authorization from a bank or having to have a minimum balance. Despite the growth of cryptocurrency, banks have been trying to remain relevant.

Additionally, Bitcoin can be deposited in regulated cryptocurrency banks. They can detect suspicious activity and offer protections like banks, such as account monitoring. In addition to buying and selling cryptocurrencies, these services allow users to withdraw money to conventional bank accounts. 

Particularly if you do not intend to hold cryptocurrency for a long time, these services are useful. But your money can also be seized if your account is frozen. Basically, they're no different from banks. Despite the fact that crypto native banks are more decentralized than traditional banks, they would impose withdrawal limits, Know Your Customer requirements, and surveillance upon you. Additionally, only a few of these banks adhere to strict regulations.