Crypto coins, such as Bitcoin, live on a blockchain where users can access them. All actions with crypto are made through a special app called a wallet.
We can compare it with a bank card. Users can use the bank card to access and manage money stored in their bank account. In the same way, they can use a BTC wallet to handle cryptocurrency kept on a blockchain.
What Is a Bitcoin Wallet Address?
Each wallet holds a random string of symbols called an address. When someone needs to send money, they ask for a recipient's address. When one needs to receive crypto, the sender will again ask for a wallet address.
To understand clearly what it is, you need to know what private and public keys are. A wallet holds such key types (a randomly generated string of numbers and letters):
- Private
- Public
Imagine that a private key is your PIN that accesses your money in the bank. It provides complete access to your coins and enables their management. The person who knows your private keys can handle your crypto. This is why you should never share private keys with anyone.
Public keys are your account number; users share them to receive funds. When somebody needs your Bitcoin address, you give them a public key.
What Does Bitcoin Mean in Text?
Bitcoin is the brand name of a peer-to-peer decentralized crypto project. Bitcoin transactions are written down on a public ledger called blockchain, and copies of this ledger are held on devices (nodes) located in different parts of the world which ensures its decentralization. Each new transaction is broadcast to the network, shared with all nodes, and visible to anyone.
Bitcoin has gained popularity since its launch by Satoshi Nakamoto in 2009. Now, Bitcoin has developed into the most significant crypto out there. Along with the full name, the BTC abbreviation (short name) is often used.
What Does Bitcoin Look Like?
Bitcoin is not a physical coin or banknote. Each coin is represented by a piece of code recorded on the blockchain.
Many users still believe that crypto coins, including BTC, are stored in a special wallet. This is not correct; they are stored on a blockchain and never move from it.
Then, what does a crypto wallet look like, and how does it work? Let’s explore this further to learn more.
What Is a Crypto Hardware Wallet?
This is a kind of a device (such as a USB thumb drive) that safely stores private keys. Cold means that it doesn’t connect to the internet, thus ensuring an additional security layer for coins. This is why this wallet type is considered a safer option for storing significant amounts of crypto in the long term.
Software wallets, on the other hand, are called hot because they are connected to the internet. These wallets are easy to use and offer quick access to coins. However, they are vulnerable to hackers, who can attack the app and access crypto. Software wallets are used to store crypto needed for frequent operations, e.g., trading.
How Does a Hardware Wallet Work?
A hardware wallet usually has limited functionality and allows users to send, receive, and sometimes swap cryptocurrencies. It is mainly used to store private keys safely and connects to the internet only for a short time to sign a transaction with a unique cryptographic key called a private key.
When a user needs to perform a transaction, he connects the device to the Internet through a computer. The device communicates directly with the ledger through a special process called crypto bridging. This bridge moves the unsigned transaction to the device. This swap is then signed within the device with a private key and sent back to the ledger, where it is broadcast to all nodes.
The most important thing is that private keys at no moment leave the hardware wallet, which is why it is considered the safest place to store crypto investments.
How to Create a Bitcoin Wallet?
How do you get a Bitcoin wallet? The process may differ a little bit depending on which wallet type you pick. However, whatever you choose, the following shall be noted:
At some point, a seed phrase will be displayed. It consists of 12 or 24 random words and serves as a key to your wallet. Even if you lose your hardware device or damage a device where the soft wallet is installed, you will be able to restore your wallet on another device with the seed phrase. This is why you should write it down and store it safely. Never share it with anybody.
How to create a software wallet
Here is a guide on how to create a software Bitcoin wallet.
- Select the correct application.
To choose the right app, consider security, reliability, and the team's expertise. Also, check whether the app supports the needed cryptocurrencies, the availability of direct swaps, and other features that may be of interest.
- Download the BTC wallet app to your phone or computer.
Download the application only from the official app store or the wallet provider’s website.
- Create an account.
Copy-paste or write down the seed phrase and store it in a safe place. Fill in the information requested by the wallet and set up a strong password.
- Transfer your funds.
Transfer funds to your Bitcoin wallet by purchasing crypto with fiat or receiving crypto from someone.
How to get a hardware Bitcoin wallet
Here is how you get a Bitcoin wallet as a device.
- Choose the hardware.
Look for a reliable manufacturer, check its reputation, and see if it has a history of security breaches. Make sure the device supports the needed coins.
- Buy the hardware and install software.
Most wallets come with a setup wizard to guide you through the installation process. Follow all the instructions to set up the software correctly. Copy the 12- or 24-word seed phrase in a safe place; losing it results in losing your funds.
- Transfer your cryptocurrency.
Bottom Line
Choose a wallet carefully, set it up by following all steps, and maintain it. Keep the seed (recovery) phrase in a secure place, and don’t share it with third parties because it is access to your money.