Online payments have been used for years now. People purchase, book and receive money online daily. We buy clothes online, we pay our household bills, we play at online casino sites, we purchase all kinds of vouchers etc. In recent years, the cryptocurrency Bitcoin appeared and became quite popular.
You’ve decided to start using Bitcoin as your currency but you have no idea how wallets work. In order to choose the right Bitcoin wallet, you will need to know a few basic things.
A bitcoin wallet is just like your typical bank account: you use it to receive, send (pay with) and store your Bitcoins. You need a private key to access your account and public key to receive or send money. Another thing you need to know is that there are Cold and Hot Wallets.
Cold Storage Wallets are generally more secure, as they store your Bitcoins offline. This means that your Bitcoins are impenetrable for hackers as you store them physically. Contrarily, Hot Wallets are online storage wallets where your Bitcoins are more prone to hacking as they can be accessed from web portals anywhere you are.
Hardware Bitcoin Wallets
This is the most secure, Cold Storage Wallet, where your Bitcoins are stored on a hardware device, similarly-looking to USB which need to be plugged into your laptop when you’re making a transaction. They have a striking backup and generate the private keys on the device itself, and more importantly, offline. Just in case, you can also secure them with a password.
Paper Bitcoin Wallets
This basically means having your private and public keys printed out on a paper. This method is technically still classed as a Cold Storage Wallet, as it is stored offline. You physically have the paper, meaning it is not online and cannot be hacked. Yet, as it is just a piece of paper, you know that it can be damaged, lost or even stolen, so make sure you make multiple copies of it. If your paper wallet does get stolen, there is virtually no protection from the thief stealing the Bitcoin stored on there.
To get a paper wallet you simply create a new wallet and print out the public and private key. Beware of some online paper wallet providers as there are some malicious sites out there who will give you a new wallet, but retain the private key in order to remove the Bitcoin when you’ve sent it there.
Online Bitcoin Wallets
These are the most convenient to use, as you can use them anywhere and from any device as long as you’re connected to the internet. You can use them every day for making small transactions, in online stores and places that accept Bitcoins. You can book a flight on Expedia, you can purchase gifts from eGifter, and you can even buy your favorite pizza at PizzaForCoins in just a few clicks!
Of course, there’s a downside to using this type of wallet – it is a Hot one. Your Bitcoins and private keys are online, stored on another server. This makes it pretty easy for inquisitive hackers to try and steal them. The best way to use this type of wallet is to have a small number of Bitcoins on it and keep the rest on Cold Storage Wallets.