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Everything Beginners Need to Know About Bitcoin Wallet

Amit Gaikwad
Everything Beginners Need to Know About Bitcoin Wallet

Bitcoin was the first cryptocurrency invented. A person can earn/trade for Bitcoins or can mine (create) them. Mining them is a process that uses specialized cryptocurrency mining softwareand computer processing power to make the complex mathematical calculations required to create Bitcoins.

Bitcoin transactions are recorded in a blockchain that makes a permanent record of all the transactions. Blockchains are managed on a peer-to-peer decentralized basis. The blockchain uses public encryption keys to identify the buy/sell participants in a transaction. Bitcoin users need to have a Bitcoin wallet with public/private encryption key pairs in order to make Bitcoin transactions.

Guide to Bitcoin Wallet

Encryption is the basis for protecting the information held in a Bitcoin wallet. There is a public encryption key that can be given to anyone and is the public information stored in the blockchain records. There is matching private encryption that is necessary to do any transactions with the public key.

A Bitcoin wallet is a storage medium that holds the Bitcoin information and the public/private encryption keys necessary to make Bitcoin transactions. A Bitcoin wallet may be information written on paper or digital information stored locally by a user on a hard drive or a thumb (USB) drive or stored online with a digital wallet or on a cryptocurrency exchange.

Bitcoin use is semi-anonymous because the public/private encryption keys do not give any other information about the users. This was one of the main attractions for using Bitcoins originally, especially by criminals. However, making Bitcoin transactions through a cryptocurrency exchange identifies the users.

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Best Bitcoin Wallet

There are many choices of Bitcoin wallets. The best one to use depends on the need. There are two basic categories of Bitcoin wallets. One type is self-managed and self-protected. The other is software that is managed online.

Self-managed wallets include paper wallets, desktop wallets, and hardware wallets, such as those stored on a thumb (USB) drive. Online wallets are web-based software systems connected to the Bitcoin blockchain records and/or part of a cryptocurrency exchange system.

How Do I Create a Bitcoin Wallet?

A self-managed Bitcoin wallet is a secure way to store information but does not directly allow any Bitcoin transactions. You will need a public encryption key with a public address to receive Bitcoins and a private encryption key that is used to spend or transfer the Bitcoins that are held at that public address.

This information can all be stored on paper and the things needed can be created by using BitAddress or BitcoinPaperWallet. Having a paper Bitcoin wallet reduces hacking risk, although the paper records need to be securely protected.

The Bitcoin wallet information can be stored on a desktop or laptop computer using local downloaded software such as Electrum and Exodus. The information can be stored on a hardware device, such as those offered by Trezoror Ledger Nano X. There are also mobile solutions such as MyceliumSamourai, and Bitcoin Wallet.

To use a self-managed Bitcoin wallet requires sending the public encryption key to another person who wants to do a Bitcoin transaction and then using some intermediary who is paid a fee to get the Bitcoin transaction added to the public blockchain records. This is a slower method and the fee offered for recording the transaction may need to be substantial to get the transaction recorded on the blockchain.

How to Get a Bitcoin Wallet?

The fastest and easiest way to get a Bitcoin wallet and to be able to make transactions is to sign up for an account on a cryptocurrency exchange, such as Coinbase or Robinhood. Coinbase works online and for mobile users. Robinhood is only for mobile users and is popular because it offers all buy/sell transactions for free.

A Bitcoin wallet, managed as software on a cryptocurrency exchange, allows instant transactions for the published cryptocurrency exchange prices. There is no need to search for an individual to conduct a transaction. Like a stock exchange, a cryptocurrency exchange matches buyers and sellers at current market prices.

For beginners, this is the easiest way to get started; however, DO NOT keep significant cryptocurrency funds in a cryptocurrency exchange. Over $1 billion has already been lost this way. Keep only enough for transactions and realize your cryptocurrency is at risk on an exchange. Keep large amounts of cryptocurrency elsewhere, by using a safer, offline storage method.

Holding More Than Just Bitcoins

Bitcoins are the most well-known form of cryptocurrency; however, there are many other cryptocurrencies to choose from now. Most cryptocurrency wallets can hold more than just Bitcoins. Coin Time Machine lists 100 cryptocurrencies and their current values.

Here are the top 10 cryptocurrencies:

  1. Binance Coin
  2. Litecoin
  3. EOS
  4. Bitcoin Cash
  5. Bitcoin SV
  6. Bitcoin
  7. Cardano
  8. Monero
  9. Dash
  10. Ethereum

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Amit Gaikwad
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