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WHAT IS A BITCOIN WALLET?
Bitcoin wallets are software
applications that implement the rules of the Bitcoin protocol to ensure that
users can easily and securely send and receive bitcoin transactions. Bitcoin
wallets also show information about each transaction that is relevant to the
wallet, including transactions sent and received by the wallet.
To receive payments, a wallet
will usually generate a new address for each transaction. To send payments, the
wallet will digitally sign transactions with the correct private keys and
broadcast transactions to the bitcoin network. Once a transaction is confirmed
by the network, the wallet will no longer be able to spend the same bitcoins
used in the transaction again.
When you think about buying
bitcoin, you will also need to think about a place to store it. Bitcoin is
usually stored in wallets. Bitcoin wallets use special codes called private
keys to authorize transactions. Anyone who has the private key to a
bitcoin wallet can authorize transfers to other wallets. Hence, it is very
important to keep the private keys to your wallet safe and secure.
Bitcoin wallets can be offline
(also known as cold storage) or digital wallets. Additionally, they can be
custodial or non-custodial. When using a custodial wallet, you are entrusting a
third party to hold your private key. When using a non-custodial wallet, you
are the only one to have the key to your wallet.
Not all crypto wallets are
created equal. There are a few different types of wallets, and the best bitcoin
wallet largely depends on how you plan to use bitcoin, what your risk tolerance
is, and how much time and energy you want to put into securing your bitcoin.
Bitcoin wallets largely exist
on a spectrum. On one side of the bitcoin wallet spectrum, there are wallets
that are easy to use, but that require users to give up levels of security in
exchange for that ease of use.
On the other end of the
bitcoin wallet spectrum are wallets that might take additional time or expense
to set up and establish — and they might be more difficult to access on a day-to-day
basis, but they provide secure long term storage of bitcoin and other digital
assets.
The great thing about bitcoin
wallets is that most bitcoin users have more than one kind of wallet depending
on how when and how often they plan to use their crypto. Another thing to
consider is that bitcoin wallet design and usability is getting better every
day, which means that in the future there will be even better and more secure
options.
