Bitcoin (BTC) and thousands of other cryptocurrencies in the market have a lot of special features. One of the more interesting facts about them is that they can be stored in many different ways.
As a digital currency, Bitcoin is accessible through personal devices connected to the Internet. It works solely using technology and doesn’t have a physical form, unlike paper bills and coins that can be kept inside your wallet or purse. Since Bitcoin is a unique form of money, it also uses special storage called a Bitcoin wallet or digital wallet.
However, there are many different kinds of Bitcoin wallets and we know that can get a bit tricky. To get you started, here are some of the more popular ways to store and access your Bitcoin.
Types of cryptocurrency wallets
There are two main categories of wallets you should be familiar with in the crypto world: the hot and cold wallets. To better understand each, let’s further explore the difference between the two and examples of each wallet.
This type of crypto wallet is digital wallets accessible via personal devices such as laptops and smartphones connected to the Internet. Hot wallets are actually the most popular type of digital wallets in the crypto sphere. Among the many reasons behind it is that you can get your own hot wallet either at lower prices—sometimes, even for free.
- Mobile wallets
This type of hot wallet can be considered as the most efficient storage among all. This is because it can be installed on smartphones, making your BTC funds accessible wherever you go. Mobile wallets are ideal for making online purchases, completing bill payments, transferring money, peer-to-peer payments, and more.
- Web wallets
Web wallets can be found in various Bitcoin marketplaces online like Paxful, which gives you a free and secure Bitcoin wallet right after creating an account on the platform. This type of hot wallet is accessible via web browsers. Often, web wallets also have a mobile version.
If hot wallets need an Internet connection for access, cold wallets don’t. These are physical stores where you can securely store your Bitcoin funds. Here are some examples of a cold wallet.
- Desktop wallets
This cold wallet type is installed on a laptop or desktop computer, which works as an address where a user can receive or send BTC funds. Since desktop wallets are installed on personal computers, owners can take full control of their Bitcoin and secure access to their private keys.
- Hardware wallets
Hardware wallets are the type of Bitcoin wallets that you can also carry around with you. It comes in the forms of USB flash drives and other portable and external devices. Hardware wallets remain offline for the most part, meaning they aren’t as susceptible to hackers compared to hot wallets. However, the issue of them being misplaced or damaged is one you’ll have to look out for. To avoid that from happening, always be mindful of your device and keep your hardware wallet in a very secure space.
- Paper wallets
This type of cold wallet is considered the most malware-free, among others. This is because a paper wallet is a piece of paper where your public address and private key are printed out. There is really no need for an Internet connection to view and record them.
However, like hardware wallets, there are still some risks of getting hacked if your piece of paper gets stolen or misplaced. So, be sure to keep your paper wallets in a secure place, away from anything that can also wear it down like water splashes, flame, and others.
Hot wallets vs. Cold wallets
Both wallets have their advantages and drawbacks. To help you find which one best suits you, let’s quickly go over a few more things you should know about them.
As discussed earlier, hot wallets are connected to the Internet. This makes them accessible and convenient since you can complete different transactions with only a few clicks. On the flip side, this is also what makes them highly vulnerable to various forms of cyberattacks.
If you’re planning to get a hot wallet to store your BTC funds, it’s ideal to scout for a Bitcoin wallet provider with robust security features. One example is the Paxful Wallet, which uses multi-signature technology and two-factor authentication (2FA) for an added layer of security.
On the other hand, cold wallets are physical devices that you can carry anywhere since they come in portable forms like flash drives, laptop applications, or literal pieces of paper.
While cold wallets are less prone to cyberattacks, there are still many ways hackers can compromise them. If they’re left in unsafe places, they could be stolen or damaged.
There are many ways to access and store your Bitcoin and hopefully, this will help you decide which to use. Should you go for a hot wallet or a cold wallet? The answer depends on you and your needs. Explore and familiarize yourself with each, so you’ll know which one best suits you!