Introduction to Bitcoin Wallet-Online Earning

Introduction to Bitcoin Wallet:

Today we talk about Bitcoin wallets and how to choose the best one. So even though we’ve got

a lot to talk about, don’t worry, we’ll simplify it for you, and in the end we’ll also help you choose the best wallet for your needs. Let’s get started.

A Bitcoin wallet is a program to send and receive Bitcoins, store Bitcoins and monitor Bitcoin balances. Just like you need an email program like  Outlook or Gmail to manage your emails, you need a Bitcoin wallet  to manage your Bitcoins. Wallets interface with the Bitcoin blockchain; that global ledger of bitcoin transactions. Wallets monitor Bitcoin addresses on the blockchain and update their own balance with each transaction.

Now here’s one of the most important things to remember about a wallet. What defines a wallet is where its private key is stored.

A Private key?

 What does that mean?

Well, a private key is just a very long  string of numbers and letters that acts as the password  to your Bitcoin wallet. It’s from this number that  your wallet gets its power to send your Bitcoins to other people. You can also think of it like the secret coordinate  for locating your Bitcoins.

In other words,whoever knows your private key has control over your Bitcoins. The private key is also used to generate your Bitcoin address. This is just like your email address.It’s something you want to give out to people who want to send you Bitcoins. However, even though the Bitcoin address is generated through the private key, there’s no way to figure out what the private key is just by examining a Bitcoin address. To sum it up, the wallet’s core function is the creation,  storage and use of the private key. In other words it automates Bitcoin’s complex cryptography for you.

As Bitcoin wallets evolved HD wallets, or hierarchical  deterministic wallets, were created. HD wallets generate an initial phrase  known as a seed or mnemonic phrase. This seed is a string of common words which you can memorize instead of the long confusing private key. If your wallet gets destroyed or stolen, you can enter the seed in order to reconstruct the private key. Additionally, an HD wallet can create many Bitcoin addresses from the same seed. All of the transactions sent to addresses created by the same seed will be part of the same wallet. Because these private keys and seeds have complete power over your Bitcoins they must be kept secret and safe.

If you fail to protect your wallet’s private key or seed, the bitcoins it controls could be irretrievably lost.A standard Bitcoin wallet will create a wallet.dat file containing its private key. This file should be backed up by copying it to a safe location like an encrypted drive on your computer, an external flash drive or even copying it to a piece of paper and hiding it away. An HD wallet on the other handwill supply you with a seed phrase with up to 24 words that you should write down in a safe place.

Okay. So much for wallet theory. Let's move on to the different  Bitcoin wallets available to us. Some wallets hold a full copy of the Blockchain in order to validate each and every transaction.These are also called full nodes. Other wallets, also known as SPV wallets or lite wallets, don’t hold a full copy of the Blockchain. They rely on full nodes that they are connected to in order to validate transactions.

SPV stands for Simple Payment Verification:

These wallets are faster and consume less disk space.Since the blockchain today is becoming increasingly big in size many wallets offer an SPV solution for limited capacity devices such as mobile phones, tablets and desktops.

Hot wallets: 

Hot wallet refers to any form of Bitcoin wallet that is connected in some way to the Internet. This can be a wallet that is connected to a web service, a wallet installed on a computer connected to the Internet or even a wallet installed on your mobile phone, assuming you have data transfer to and from your phone. Hot wallets, although the most popular,  are also the least secure since they allow access to their inner workings through internet connections.

Web wallets: 

Markets, exchanges, betting sites and other Bitcoin services frequently require you to deposit funds into their online wallets in order to conduct your business.These web wallets are the least secure option for storing Bitcoins since you don’t have any access to your private keys. You’re basically asking someone else to hold your coins for you.Such wallets are also more vulnerable to hackers since they have many loopholes along the way.

For example, the website in question,the device you’re using to connect to the website or the internet connection can be monitored to steal your Bitcoins. This forces you to rely upon both the site operator’s honesty and their security practices.

In the event of internal fraud or external hacking, your bitcoins will likely be irretrievably lost. On the other hand, web wallets are highly convenient as they allow you to buy, sell and send Bitcoins at a moment’s notice.

More competent web wallet services will provide Multi-Factor Authentication options like validating every account login with a text message,to guard against external hackers. Even so, for storing any significant amount of coins, web wallets are not worth the risk.That’s why we advise that you avoid  the number one newbie mistake and never to keep your Bitcoins  in an exchange wallet.

Desktop wallets: 

These type of hot wallets store your private key on your computer. So as long as your computer is free of malware or any security weaknesses your Bitcoins are safe. However, we all know that’s not  the case for most of us. Today it’s hard to be 100% protected and this makes desktop wallets that are connected to the internet a valuable target for hackers. Moving on to mobile wallets.

These are wallets that store your private key on your mobile phone. Although many wallets are accessible via mobile apps, doing so presents the worst  possible scenario for security.Mobile wallets offer low security and terrible privacy, given the potential association of your Bitcoin wallet,phone number and geo-location. As phones are frequently lost, broken or stolen, it’s strongly advised that you enable multi factor authentication, password-protect your wallet and create a private key backup. Mobile wallets are highly convenient and designed to provide as much security as possiblein an insecure environment.

Cold storage wallets: 

Cold storage refers to any type of wallet that is independent of any Internet connection and therefore cannot be hacked remotely. Some examples of cold storage wallets are hardware wallets, paper wallets and brain wallets.

Brain wallets: 

Brain wallets are just a way to create a private key out of a predetermined text or set of words. So instead of getting  a randomly generated seed you decide for yourself on a passphrase and use some basic algorithms to generate a private key from that passphrase. However Brain Wallets have a significant disadvantage, they have a higher probability of being hacked.This is because people are usually very predictable in what to use as passwords or supposedly random text and hackers have a way of knowing that.

Now you know all there is to know about Bitcoin wallets, so let’s see how to choose the best wallet for your needs. The first thing you need to know is that different people will use different Bitcoin wallets for different purposes.

How many Bitcoins will I be storing?

How frequently will I use the wallet?

Can I afford to pay for a hardware wallet?

Do I need to carry the wallet around with me?

Do I need to share the wallet with someone else?

Am I tech savvy?

 How much do I value my privacy?

Do I trust myself to safeguard my wallet or do I want to give some 3rd party the task of doing so?

Depending on the answers to these questions it should be easier for you to choose a wallet. Most of the popular Bitcoin wallets are listed on our Bitcoinwallets page on the site, so now it’s just a matter of choosing  the best wallet for your needs.

Before we conclude keep in mind that you may want to use more than one wallet. For example, you can use a hardware wallet for large sums of Bitcoins and also have a mobile wallet with a small balance on it for daily payments. This way even if your mobile phone breaks or gets stolen you’re not risking a lot of money.

If you still have any questions or comments on the video feel free to leave them in the comment section below and I’ll see you… in a bit.