Bitcoin (BTC) has risen in popularity over the past couple of years. BTC is now much more accessible to the public, and people are gaining more knowledge about cryptocurrency. However, many are still curious about properly storing their coins.
The answer lies in something called Bitcoin wallets.
What are BTC wallets?
Bitcoin wallets function similarly to real-world wallets. They basically serve as safe storage spaces for your Bitcoins. Private keys serve as secure encryptions to these wallets.
The good thing about wallets is that you do not have to set up private keys yourself. Wallet applications do it for all users when they log into their accounts. All outgoing transactions also generate secure wallet addresses through the private key.
In addition to saving information like addresses and transaction records, BTC wallets also allow users to send and receive the currency. Most wallets also support other forms of cryptocurrencies.
How do BTC wallets work?
Private keys are stored in the devices that house Bitcoin wallets. These devices do not carry the coins themselves, as those are securely stored on something called the blockchain. The key is used to carry out all blockchain transactions.
Bitcoin wallets come in different forms. These depend on a user’s requirements and preferences. Some offer more security, ease of use, and availability.
How do I choose a Bitcoin wallet?
When choosing a BTC wallet, you must carefully check the different types and what they can offer. Here are the different types of wallets:
Desktop wallets are accessed through desktops or laptops. These are applications that allow users to control transactions on their wallet. They also offer integration with other exchanges and software.
Mobile wallets function the same way as their desktop versions but exist through smartphone apps. These allow users to make fast payments through kiosks, QR codes, and other means.
Web wallets are online services that store BTC for users. They can be accessed through any device.
Hardware wallets store private keys via physical, offline devices. These look similar to USB flash drives, and must be plugged in to computers to make transactions.
Are physical Bitcoins better than banks?
Physical BTC exists, but they come preloaded with a specific amount of crypto. They conceal the value due to the hidden private key, as the seal cannot easily tamper. Some look like physical credit cards, like Bitbill, while others look like medals.
Because of their limitations, physical Bitcoins are usually for collection only. Most people see physical coins as antithetical to the point of Bitcoins since they do cannot be seamlessly transferred with other users.
On the other hand, banks also restrain cryptocurrency-related activities. These include transfers to platforms like Bitcoin exchanges. The reason that banks do this is because of money laundering, although some critics cite the decentralized model of Bitcoins as a direct threat to banks.
Since banks serve as intermediaries between people and their funds, they do not cater to the decentralized transactions that BTC offer. However, some banks have started to dip their toes into cryptocurrencies. There are a few banks that have started offering storage services for Bitcoins, and some policies have started to allow banks to carry cryptocurrencies for their clients.
But even with these new developments, it seems that banks are an unnecessary mechanism for crypto users. Bitcoin already has secure storage for users via blockchains. Bitcoin also enables users to transfer coins between users without any additional fees. Banks are notorious for hidden transaction charges, which is why crypto platforms have gained popularity.
Some dedicated crypto banks exist to serve as custodians for Bitcoin. These banks have security mechanisms like account monitoring and authentication. They also allow users to sell their Bitcoins and withdraw them to their traditional bank accounts.
Regardless of your choice, both physical Bitcoins and banks seem like inferior choices to exchanges and wallets. Physical Bitcoins have a lot of limitations, while banks can freeze your accounts. If you are looking to store your crypto for the short term only, then it might be worth it to consider these services.
Whichever way you store your BTC, make sure that you choose a wallet or platform that has strong security. Keep your private keys as safe as possible and keep backups just in case.