Bitcoin wallet

Bitcoin Wallet

Niels Bitcoin

When you buy Bitcoin you need to store it in a Bitcoin wallet. After reading this article you will know what a Bitcoin wallet is and how to use it safely. Four different kinds of Bitcoin wallets are discussed. The process of choosing what kind of Bitcoin wallet best suits you and how to create such a Bitcoin wallet is explained.

What is a Bitcoin wallet?

Bitcoin wallet

A Bitcoin wallet is software used to communicate with the Bitcoin network. More specifically, it is used to send and receive transactions. The software exists of a public address and a private key.

The public address is an address people can send Bitcoins to. This can best be compared to your email address: within email each user has an email address and the email address is used by other users to send emails to.

Some notes on security

The private key of a Bitcoin address is used to send bitcoins from that address to the public address of another user. The private key within Bitcoin can best be compared to the password of your email address; once a certain person has your emails password he can abuse it by sending emails from your public email to other users. Within Bitcoin this is the same, if someone has your private key he can send your bitcoins to other addresses.

Once a Bitcoin transaction is sent, it is a one way trip. The only way to retrieve your Bitcoins would be for that person to send it back to you voluntarily. Therefore, it is very important to never share your private key with anyone.

What different types of wallets are there?

The Bitcoin wallets can be categorized under hot wallets and cold wallets. Hot wallets are wallets that are stored online. Cold wallets are stored offline and are therefore secure against malware attacks. Bitcoin owners who want to have maximum security use cold wallets although they are most often more difficult to use.

Online Bitcoin wallet

The two types of cold wallets are hardware wallets and paper wallets. The hardware wallets looks like a USB stick. However, the keys are generated offline. Due to this the wallet is secured against potential computer malware of the user. Paper wallet is a fancy term for printing out your public and private keys on a piece of paper. A paper wallet however can easily be torn or water damaged. Therefore, it is important to make multiple physical copies of this paper.

The two types of hot storage are software wallets and online wallets. A software wallet is a piece of software that can be downloaded on the computer or mobile device of the user. The software enables the user to easily create public and private keys and send and receive transactions. The online wallet is the most user-friendly method. Creating a wallet is as easy as creating an account. You have access to your online wallet with any device connected to the internet.

An example of an online wallet is Bitvavo. Apart from only Bitcoin, it is possible to store all the cryptocurrencies supported by Bitvavo on your Bitvavo wallet.

Creating a Bitcoin wallet

Hardware wallets

A hardware wallet can be created by first buying the hardware required to create a hardware wallet. The two most popular companies creating hardware wallets are Trezor and Ledger. Once the hardware wallet is bought, it is sent to you by mail. The hardware wallet can be installed by plugging it in to your computer. Once installed it is possible to send bitcoins to the public key of the hardware device.

Software wallets
Bitcoin software wallet

A software wallet can be created by installing a specific Bitcoin software wallet on your computer. Be sure to download a trusted software wallet. Once the software wallet is downloaded a wallet can be generated and bitcoins can be sent and received on your computer or mobile device.

Online wallets

An online wallet can be created by creating an account on the website of a company hosting online wallets, such as Bitvavo. Once the account is created it is possible to send and receive bitcoins and all other cryptocurrency supported by the online wallet. The user has access to and can sent cryptocurrencies on any device that is connected to the internet.

Paper wallets

A paper wallet can be created by using an online wallet generator. The generators most often use your browser’s JavaScript engine to create a private and public key. By doing so no keys are sent over the internet. The keys are displayed on a screen which can be printed.

How do I choose the correct Bitcoin wallet?

What Bitcoin wallet best suits you depends on what you want. Each kind of wallet has specific characteristics.

Bitcoin hardware wallet

Hardware wallets are very secure against potential malware. They however require certain knowledge about Bitcoin to be used. Sending multiple transactions from your hardware wallet can be a labor intensive task.

Software wallets enable the user to store bitcoins on the computer or mobile device. It is however important to understand that a software wallet is as secure as the computer it is running on. If the computer is compromised by a virus or malware, the software wallet is no longer secure.

With online wallets the security and storage of your Bitcoin is dealt with by a third party. It is very easy to use and enables the user to access his bitcoins all over the world.

Creating a Bitcoin wallet on Bitvavo

It is possible to create an online wallet at Bitvavo. We offer a user-friendly platform where you can beside Bitcoin also buy a lot of other cryptocurrencies. It is free to create an account at Bitvavo, once your account is created you can transfer an amount to your account by using Ideal or sending a transaction to the bank account of Bitvavo. If the amount is transferred to your account you can buy multiple cryptocurrencies. You do not need your own wallet and you can access your cryptocurrencies from any device connected to the internet.

At Bitvavo it is easy to send your amount stored on the online wallet to another wallet. You also have the option to sell your cryptocurrency and withdraw a certain amount from your Bitvavo account to your bank account.