A Bitcoin or cryptocurrency wallet is also referred to as a digital Wallet is a secure digital wallet use to store, send, and receive digital currency like Bitcoin. A Bitcoin or cryptocurrency wallet is a software program where Bitcoins are stored. A cryptocurrency wallet actually stores the address of digital currency, its private key (password) and keeps the record of transactions. The private keys that are necessary for accessing a Bitcoin address are stored on a “bitcoin wallet.” In general, wallets grant you access to your public Bitcoin address and allow you to sign off on transactions, but they differ based on how you choose to access them.
The wallet's core function is the creation,storage and use of the private key. In other words it automates cryptocurrency complex cryptography for you.
The Bitcoin and other cryptocurrency wallet comes in many forms; the five main types of wallets are desktop, mobile, web, paper and hardware.
Desktop Wallet: The most common type of wallet. Typically an app that connects directly to a coin’s client.
Mobile Wallet: A wallet that is run from a smartphone app.
Online Wallet: An online wallet is literally a web-based wallet. In a browser based wallet service, our bitcoins or altcoins are stored on external servers. Usually, cryptocurrency exchanges give one browser-based wallet to their users through which they make transactions. New browser-based wallets can be created within seconds and transaction are processed quickly. However, they offer very low security, as we trust the operator with our assets. They are recommended for those users who do frequent micro payments. Coinspot is a famous browser-based wallet in Australia, used by majority of Australian Bitcoin users.
Hardware Wallet: It is the safest form of keeping the digital currency. A hardware wallet exists as a separate device in which bitcoins or altcoins can be downloaded and kept safe. Every hardware wallet comes with a software interface which we use after connecting it with our computer or smartphone. Some hardware wallets have display feature to show the available balance. Keeping a hardware wallet disconnected from the internet eliminates the risk of cyber-attack. Ledger and Trezor are few of the most popular hardware wallets.
Paper Wallet: You can actually print out a QR code for both a public and private key. This allows you to both spend and receive digital currency using a paper wallet. With this option, you can completely avoid storing digital data about your currency by using a paper wallet.
Gotcha 1: The term “hot wallet” describes a wallet connected to the internet. The term “cold wallet” describes a wallet not connected to the internet (for example a hardware wallet unplugged and in a safe.) When cryptocurrency is in “cold storage” that mean it is being held offline in a “cold wallet.” Funds you want to use like cash should be in hot wallets, funds you want to store long term are best held in “cold storage” in an offline wallet.
Gotcha 2: Watch out for browser extension malware if you are using online wallets, you may want to use a different browser for your online wallet than you do for your day-to-day internet browsing.
Gotcha 3: Remember that with any wallet, if you lose your private key, then you lose your money. That is true for paper wallets, hardware wallets, or any other wallet type. The reason you lose your keys doesn’t matter; there is no way to reclaim your cryptocurrency without them.