Types of Bitcoin wallet define the way you store Cryptocurrency, and each of them varies in terms of security and accessibility. Digital asset storage is never the same. The deposit addresses you use on wallet providers are part of your account, so you never have to deal with the frustration of losing funds. Exchanges and companies dealing in Bitcoin usually operate more than one type of wallet to provide a secure experience. That said, here are the different types of Bitcoin wallets.
Cold Bitcoin Wallet
Cold storage is a secure way to safeguard funds from hackers, viruses, and malware. These wallets ensure that private key is never online and is far superior to a hot wallet. In a cold wallet, the pair of cryptographic private keys are generated and kept always offline. These types of Bitcoin wallet are mainly used by exchanges and companies dealing in millions of dollar worth of Cryptocurrencies and is a great way to protect funds in case of a hack. The Cold BTC wallet consists of
Paper Wallets
Although they have declined in popularity, these wallets were the standard method to secure coins before the hardware wallets came to existence. These wallets are immune to hack since they are offline. These types of Bitcoin wallet contains private keys and address printed on a piece of paper in the form of a QR-code. However, this type of wallet is becoming obsolete because nobody wants to print hundreds of papers to secure their Bitcoin or transfer them when you can order a hardware wallet to the job!
Hardware Wallets
The hardware wallets are small computers such a USB and are built solely to store Bitcoins. It is a unique type of Bitcoin wallet and saves the user’s private keys in the device. These types of wallets are also immune to computer viruses, and the Trojans or Malware cannot move funds out of your wallet in plaintext.
Desktop Wallets
A desktop wallet is the original Bitcoin wallet. It is software that is downloaded and installed on your desktop device. They allow users to generate an address and perform all the functions supported by the latest BTC wallet. Using the desktop wallet, you have access to private keys and they are a great solution if you usually transact small amounts of Bitcoin regularly.
Hot Bitcoin Wallet
Hot wallets are software that allows day-to-day spending of Bitcoin. They are called “hot” because they are usually open on computers or mobile devices having access to the internet. They are vulnerable to hacks and exploits and are a lucrative target for criminals. Using these wallets is easy, but you really don’t want to keep a lot of value in your hot, online wallet. The hot Bitcoin wallet compromises of
Custodial Wallets
A custodial wallet is the most common type of Cryptocurrency wallet. The company operates this wallet on the users’ behalf and allows interaction with the Bitcoin-Qt client on its server. In simple words, it is a service provider like Coinbase or Binance. Additionally, it can also be a designated custodial wallet service provider, like the one launched by Fidelity Investments.
These types of Bitcoin wallets are great to save the time you would spend on downloading and synchronizing Blockchain. They are also easy to manage, and you don’t need any technical expertise to set up. On the contrary, you don’t have full control over the funds, and the companies operating the wallet are in charge of the security of your funds. Hence, if there is a security breach, you lose your hard-earned money with minimal chances of recovery.
Mobile Wallets
Mobile wallets are the best option for people who use Bitcoin or other Cryptocurrencies daily. A mobile BTC wallet is essential to manage spending through smartphones and allows you to pay for things without involving fiat. However, these wallets are also prone to hack, and anyone having access to your device, and passwords can easily steal your funds. Besides, the majority of mobile wallet does not provide private keys restricting full access to your funds.
In conclusion, whichever wallet you go for, it is essential to consider its safety. For people wanting a high level of security but, a hardware wallet is a perfect solution. But if that is a lot for you to do, then downloading a Bitcoin wallet mobile application is the easiest way to become part of the ecosystem.
