Bitcoin wallets are utilized to store the private keys which you require to access a particular bitcoin address to spend your funds. They exist in various forms, designed for distinct types of devices.
Bitcoins can be said as a modern equivalent form of cash and, with the passing time, more and more merchant are accepting them as a mode of payment. We used to store fiat cash in a physical wallet, and same is being applied to bitcoin, except the wallet is digital.
Actually, you don’t store bitcoins anywhere. You store the private keys that are used to access your public bitcoin addresses and sign, process transactions. This whole information is being stored in a bitcoin wallet.
Bitcoin wallets are available in several forms, which are:
1. Desktop Wallets
If you have installed the verified bitcoin client, then you are already using a wallet, but you may not be aware of it. This software, not only relay your transactions but also allows you to generate a bitcoin address to send and receive the digital currency, as well as to store the private key associated with it.
Some of the other desktop wallets are MultiBit (compatible with Windows, Mac OSX, and Linux), Hive (OS X-based wallet having some distinct features, with an app store which gets connected to bitcoin services directly), Armory (popular for providing increased level of security), and DarkWallet (emphasizes on anonymity, and uses a lightweight browser plug-in to propose with services like coin ‘mixing’ in which users’ coins are exchanged with others’, to prevent people tracking them).
2. Mobile Wallets
You cannot use a desktop wallet while scrolling down the street or in a mall, or anywhere except your home; mobile wallets prove to be more comfortable in such scenarios. A mobile wallet can be downloaded in your phone as an app, and associated private keys can be stored in it. It allows you to pay for anything directly via your phone.
Sometimes, a bitcoin wallet will also take benefit of a smartphone’s NFC feature, allowing you to tap your smartphone against a reader and pay via bitcoins without providing any information at all.
One general attribute of mobile wallets is that they are not wholly bitcoin clients. A full bitcoin client needs to download the entire bitcoin blockchain, which keeps on growing and stay available in the form of multiple gigabytes in size. It may get you into trouble as your mobile service provider may send you a bill with a tremendous amount to pay for downloading the blockchain, and also not all of the smartphones’ memory allow to keep it in them.
Some of the mobile clients are designed with SPV (simplified payment verification) in which a tiny subset of the blockchain has to be downloaded, and then supposed to rely on other, trusted nodes available in the bitcoin network to verify that what they have is the right information.
Mobile wallets differ according to the operating system you are using. Some of the satisfying Android-based mobile wallets are, Xapo, Mycelium, and Blockchain (keeps your bitcoin keys encrypted on your phone, and backs up on a web-dependent server).
Apple has not bee supporting usage of mobile wallets. However, mobile bitcoin wallet apps started to reappear on the iOS stores beginning from July 2014.
- Some other types of wallets can be utilized on a mobile like the browser-based wallet CoinPunk is being developed. Another great wallet is the Aegis Bitcoin Wallet that supports Android smartwatches.
1. Online Wallets
Online wallets store your private keys on the internet, on a system controlled by someone else. One benefit of online wallets is that you can control them from anywhere, doesn’t matter which device you’re using. Though it also has one significant disadvantage, i.e. it can put the one operating the website, an in charge of your private keys, which may prove to be hazardous to you. But, being attentive may save you from this situation.
Some of the popular online wallets are, Coinbase (an integrated wallet exchange platform that runs its online wallet globally), Circle (offers users with the facilities to store, send, receive and purchase bitcoins), Blockchain (hosts a popular web-based wallet) , Strongcoin (proposes with a hybrid wallet that allows you to encrypt your private address keys before transferring them to its servers), and Xapo (intends to provide the comfort of a simple bitcoin wallet with an added protection of a cold-storage vault).
2. Hardware Wallets
Hardware wallets are not much in number. These are the devices that can store private keys electronically and facilitate to perform transactions.
Some of the well-functioning hardware wallets are:
- Ledger USB wallet
The compact Ledger USB Wallet intends to use smartcard protection, and it remains available at a nominal price.
- Trezor hardware wallet
The Trezor hardware wallet is designed for bitcoin users who intend to manage enough stash of coins, but do not have the intention to depend on third-party bitcoin storage services.
- KeepKey wallet
A hardware wallet by KeepKey was launched in September 2015 that was priced at $239 per unit. The KeepKey wallet software was initially a fork of Trezor’s code.
3. Paper Wallets
One of the most inexpensive and well-known options for keeping your bitcoins secure is called a paper wallet. There are many sites introducing paper bitcoin wallet services. They will produce a bitcoin address for you and then generate an image having two QR codes; one will be the public address that you should use to receive bitcoins, and the second one is the private key that you can use to spend bitcoins secured at that address.
The main advantage of a paper wallet is that the private keys are not being stored digitally, and are stored offline; that’s why there are zero-percent chances of any cyber-attacks or hardware failures.