You know how Bitcoin wallet works, but are confused about the different types of Bitcoin wallets. Do you know that you don’t need to have a Bitcoin wallet to accept coins? But then why are they so important?
The Bitcoin you collect are stored and shared in a transparent system of record in the blockchain. It means that your wallet doesn’t actually hold money like a real wallet.
A shared record stores the Bitcoin, but how are these protected? When you open a wallet, it creates a specific Bitcoin address. You’ll have your own private key with which you sign every transaction.
Bitcoin address cannot be likened to an email address which you access with a password. Instead, I can only explain it as a way to check the Bitcoin you collected, or your balance- like in a bank account.
There are 3 formats of Bitcoin addresses. The Bitcoin address might function as a bank account number, but the format doesn’t resemble it. The addresses are long strings of alphanumeric characters which usually start with:
- 1- P2PKH format, e.g. 1AeCFYTebFftyWPm6Td5h6YJy6fPaMJL3
- 3- P2SH format, e.g. 3T56y2QsTR34FQjGdasjktspSpqrBkXPKl
- bc1- Bech32 format, e.g. bc1afu9tggg6epgui8f830frdwn6eh72feohqb7dpg
Which is the right wallet to choose?
There are hardware, desktop, mobile, online and paper Bitcoin wallets. Here is my short description for each one and you can decide for yourself.
Hardware Bitcoin Wallets
These are hardware devices like USBs, Trezor and Ledger Nano S, which can generate Bitcoin addresses. These are useful if I need a permanent address or plan to store the Bitcoin for an extended period of time.
Desktop Bitcoin wallet
I can opt for desktop wallets like DarkWallet and Armory if I already had a Bitcoin client.
Mobile Bitcoin wallet
To access your wallet on the go with a few taps, choose a mobile Bitcoin wallet. People who shop on their smartphone can get the benefits using popular mobile Bitcoin wallets like Xapo and Mycelium.
Online Bitcoin wallet
This is highly secure digital wallets like Circle or Coinbase where your private key is stored online. You can link these with mobile and desktop wallets and gain access from anywhere.
Paper Bitcoin wallet
It is also called offline wallet in which you receive 2 QR codes- one is your Bitcoin address and the other is your private key.
Bitcoin can get lost on the web or stay in your wallet if you try to send them to an invalid address. Bitcoin address is the most necessary part of the transactions. The above options come with pros and cons. In transactions with paper wallets, the sender might misuse your private key code. So, my advice is to choose from the digital wallets.