To get started with bitcoin, there is various equipment you will need. At the top of the list are bitcoin wallets. Your choice of Bitcoin Wallet will determine the security of your coins.
Evidently, the importance of Bitcoin wallets cannot be ignored. In this article, we shall explain what it is and how it works. Below this article, we will go over the different types of bitcoin wallets available and which the best ones are as well as comparisons. After this piece, you can jump straight to one that interests you.
What is a bitcoin wallet and how does it work?
In all honesty, most persons who consider themselves professionals in ‘Bitcoins’ are peddling confusing and misleading information about bitcoin wallets. An analogy most have grown to love is that a Bitcoin wallet is similar to a physical wallet used to carry credit cards and banknotes. A Bitcoin wallet provides you with information about the amount you have and allows you to send Bitcoins to another by using your Bitcoin wallet, entering the address of the receiver, and sending it. It makes it seem practical, since after all, coins are stored in a wallet. But this explanation is not entirely true.
Your bitcoins are not stored in a central location. On the contrary, they are stored in a blockchain. A blockchain is a record of Bitcoins which every peer in the network can use. For this reason, your wallet needs not be open to send and receive coins. The coins are technically not sent to you. The blockchain is simply updated in every transaction cycle it goes through to reflect the changes in every blockchain address.
To spend your Bitcoin, you need to make a transaction request which will be broadcasted to the peers in the network for processing. Now, the question is, how does the network know the Bitcoins belong to you?
Well, to prove ownership of the Bitcoins, you need to put a ‘signature’ on the transaction request with a strong password referred to as a Private Key. Each Bitcoin address features a private key which was created when the address was created. It is this private key that is stored in the Bitcoin wallet.
So in essence, a Bitcoin wallet is a piece of software designed to provide some basic Bitcoin functions. These functions include:
- Creating a new address and the corresponding private keys
- Provide information as to how many coins are in an address
- Use the private keys to ‘sign’ transactions to allows you to send coins
Each Bitcoin wallet can control multiple addresses. Through the Bitcoin wallets, you can also control the number of Bitcoins you take from each address. This is referred to as coin control. However, not every Bitcoin wallet has this feature.
To transact with Bitcoins, you will need a Bitcoin wallet. As you prepare to choose one, be informed there are different types of Bitcoin Wallets including desktop wallets, mobile wallets, paper wallets and hardware wallets. Below you will find all our articles related to Bitcoin wallets, where you can read all about these different types of wallets. Enjoy!