A Beginners Guide to Understand About Digital Wallets

3 min


A Beginners Guide to Understand About Digital Wallets

Bitcoins are the cryptocurrencies or digital forms of currencies that are stored in digital wallets. Unlike physical wallets, digital wallets exist on the cloud and can only be accessed with an internet connection. Users can access their digital wallets using private keys. A digital wallet mainly has three things that are important to know that are wallet address, the public key, and private key. Wallets automatically use private keys to sign the transactions initiated by users and also using the private key, and the wallet generates the wallet address. The device that you choose to download or access your bitcoin wallet is where the private keys are stored. 

In reality, bitcoins are stored on the blockchain network, and the private keys provide you with complete access and authorization to transfer your coins from one wallet to another. There are various forms of bitcoin wallets that have different features and serve differently. It would be best to choose the wallet by considering the security, accessibility, convenience, and more. Make sure to choose the digital wallet that provides you with complete authority and isn’t centralized. Also, ensure that your wallet is compatible with all other cryptocurrencies that you are planning to store and is suitable as per your usability and security needs.

Various types of digital wallets

Desktop

Desktop wallets can only be downloaded and installed on the computer. These wallets store private keys on SSD or hard drive and are highly secure as these don’t depend on third parties to store their data. But still, desktop wallets are connected to the internet, so you must use security measures. These wallets are a great solution to trade bitcoins from your computers. 

There is a wide range of desktop wallets that are designed to cater to different requirements as some wallets focus on convenience, some on security, anonymity, decentralization, and more. Desktop wallets provide multiple benefits, but there aren’t limited to performance as the transactions are directly broadcasted to the memory pool, allowing users to increase the transaction fee to increase the speed of transactions. 

Mobile 

For active or daily users of bitcoins, a mobile digital wallet is an important tool. A mobile wallet allows users to run apps on their smartphones and store the private keys on their mobile devices. You can easily pay for goods and services with your mobile wallet by scanning the QR code. Some mobile wallet apps are developed that use smartphones’ communication features, especially allowing users to tap their phones without providing any information. 

The demerit of mobile wallets is that they control the transactions and coins, which breaks the trustless philosophy of the bitcoin network. Wallets users must enable two-factor authentication as it adds a layer of protection to your wallet and coins. 2FA code is sent to your mobile device through SMS or email, and in this way, you can verify whether the login is done by you or someone else is trying to log in to your wallet. 

Web

Web wallets are online wallets that third parties control. These wallets store private keys on the server, and third parties control your private keys. Different web wallets offer different features, and some of these features allow you to link to your desktop or mobile wallets and duplicate the wallet address. E-wallets or web wallets allow users to easily access their funds from any device or browser by connecting with the internet. The third parties or organization that runs the website have access to your wallet’s private keys, and therefore, they have gain control over your funds. 

There is some serious security risk to your wallet address and private keys, and therefore, you must ensure to use the best security methods to protect your web wallet. 

Hardware

A hardware wallet is a physical device that stores private keys. Hardware wallets are known to be highly secure for storing any amount of digital coins. These wallets are immune to viruses or malware, and the funds once stored in the wallet cannot be transferred at different locations. Most of these wallets have screens that provide more security as these screens help display and verify the important details of the wallet.


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