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Here Are Important Points You Need To Know About Bitcoin Wallets

About Bitcoin Wallets

If you want to invest in Bitcoins, you need to use a wallet to store your coins. It is similar to your banking wallet, but you cannot store your fiat money in your bitcoin wallet. Apart from that, bitcoin wallets are used for storing private and public keys; you cannot store your coins in your wallet as there is no physical presence of this digital currency. Check out how you can keep bitcoin on your Android phone if you want to start trading bitcoin.

Importance of Using Wallets

How would you store your digital currency? You cannot keep them in your locker, and you cannot even carry bitcoin for buying goods and services. So, it would help if you used a wallet to store your digital assets. There are two types of keys available in your wallets – private keys and public keys. You can enter your private keys to make a transaction with bitcoin.

For example, you can send bitcoin from your wallet to another wallet by entering your private keys. Make sure you must keep your keys safe because cybercriminals can hack your wallets to steal your coins. You do not need to use your public keys for online transactions. You can share your public keys or QR code available on your wallets with another user, and they can use your public keys to transfer bitcoin from their wallet to your account.

Talking about the bitcoin transactions, every transaction is stored safely and securely in a public ledger on blockchain technology. The best part is in case you lose your wallet at any time, you can easily restore your wallet using your keys.

Types of Bitcoin Wallets:

There are different wallets available for cryptocurrencies, but you can categorize them as cold and hot wallets. Talking about cold wallets, they can easily be downloaded on smartphones in applications. You can download a cold wallet on your phone free of cost and link your crypto account with your wallet. You can use your cold wallet anytime, anywhere to make a transaction with bitcoin.

However, cybercriminals can hack cold wallets because you are using third-party apps on your phones, and hackers can hack your wallet through these external apps. If you are a daily trader, then cold wallets can be beneficial for you, otherwise, you can use a hot wallet or hardware-based wallet to store your coins.

Differences Between Private And Public Keys:

As stated above, private keys can only be used to send bitcoin and other cryptocurrencies, and you must keep it secret. On the other part, you can share your public keys to receive bitcoin from another user. You do not need to generate such keys separately, and your keys will be generated automatically when you sign up in a wallet. It is known as the Hierarchical Deterministic (HD) framework used for bitcoin key generation.

You must also know that public keys are not similar to your bank account number, and they will keep changing automatically. For example, once you share your public key and receive bitcoin from another user, your key will be changed automatically, and you need to share the new public keys with another user to receive more coins. It is for the safety of your transactions, and changing these keys automatically can keep the blockchain as well as your crypto account safe.

People get confused between address and public keys. The address is similar to public keys, and it is derived from a wallet following a hash sign; you can find such an address on your wallets, but you cannot find your public keys displayed on your wallet. Apart from that, addresses are shorter, and you can find such addresses as numeric or numbers mixed with the alphabet. But public keys always begin with numbers.

Final Words

Make sure you take back-up of your wallets once a month, especially when you are dealing with bitcoin frequently because your wallet can store many addresses, public keys, and private keys. Some auto-recovery options are available in some wallets, and your data can be exposed during this recovery or backup process.

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