Cryptocurrencies differ in many ways from conventional currencies such as euros or US dollars. Since they only exist in digital form and can only be used, they cannot be stored in a wallet in the form of banknotes and coins and can be pulled out if necessary. If you want to invest money in digital currencies, you have to think about adequate storage.
Many questions require an answer. What are the options? How and where are bitcoins safe? What are hot wallets or cold wallets? Which wallet is the best? Even those who have already invested in Bitcoin should regularly inform themselves about the security of digital coins. The Bitcoin Wallet guide provides tips and advice on how to choose the right Bitcoin wallet.
- Digital wallet for digital currencies
- Send and receive bitcoins
- Wallet online or offline Use
- There is a private key for each Bitcoin address
Table of contents
- Bitcoin wallet: prerequisite for crypto investments and transactions
- What is a Bitcoin wallet?
- Different types of wallets
- Transaction fees for a Bitcoin wallet
- Why is the wallet necessary for Bitcoin?
- Which is the best Bitcoin Wallet?
- What to consider when choosing a Bitcoin Wallet
- What is a Bitcoin Online Wallet?
- What is a Bitcoin Hot Wallet?
- What are the risks?
- What is a Bitcoin Cold Wallet?
- What is a Hardware Wallet?
- Everything Paletti with the Hardware Wallet?
- What is t a paper wallet for Bitcoin?
- Conclusion on the Bitcoin Wallet: digital wallets for Bitcoin investments and everyday transactions
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Bitcoin Wallet : Requirement for crypto investments and transactions
Anyone who has ever been in the wallet with a lot of cash, because a certain purchase should be paid in cash, should pay off have felt a little uncomfortable in some situations. It often happens that people lose some bags or their smartphone because they were simply inattentive or distracted. It is particularly uncomfortable when the wallet with ID, cards and money is lost. There may also be a risk of theft or robbery.
The necessary security should be based on the purpose. The wallet is practical because it allows the money to be used immediately. If the amount of money is small, storage in the usual wallet is sufficient. A loss is annoying, but it can usually be easily coped with. If more money is involved, the need for more protection becomes stronger and the necessary risk protection is already more extensive. There are various types of storage, from secured cash boxes to cash boxes and safes, which promise different levels of security.
Banks or financial service providers are also a classic way of storing money. Customers benefit from legal guarantees that guarantee loss compensation in the event of a loss (for example through bank insolvency). Choosing the right storage is geared towards not losing money. The risk and purpose must go as far as possible.
This applies in the same way to the storage of digital cryptocurrencies like Bitcoin, even if there are some other terms. The storage locations for cryptocurrencies are digital wallets or digital wallets. This is where Bitcoin & Co. are secured and made available for certain uses.
Since a Bitcoin is not as tangible as a euro bill, conventional storage does not work. Blockchain banking users are provided with private keys with which they can access the public Bitcoin address and carry out transactions. The prerequisite for a Bitcoin transaction is a combination of two keys (sender, recipient).
To invest money in Bitcoin and Co. and to send and receive digital coins to other users, a Bitcoin wallet is required, As with conventional wallets or safes, there are a variety of digital wallets. When choosing a Bitcoin wallet that is right for personal requirements, some details are important. Not every wallet is ideal for personal use.
What is a Bitcoin Wallet?
A wallet is the place where people keep their Bitcoin assets. The word "wallet" comes from English and means wallet. A Bitcoin wallet is therefore a wallet for bitcoins. A Bitcoin wallet is a program or application that functions as a digital wallet. The bitcoins are stored, secured and stored here. Certain wallets can be used offline like a digital savings book. Strictly speaking, private keys for one or more digital coins are stored and managed in the wallet. It has the function of ensuring the sending and receiving of bitcoins.
Sending and receiving is done using precisely defined addresses (public and private Bitcoin addresses), comparable to a checking account number. An address can easily be described as a Bitcoin account number. In addition, a crypto wallet allows Bitcoin investors to manage their personal crypto codes (keys) and monitor their digital balance.
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The basic functions of a Bitcoin Wallet include:
- Send and receive Bitcoins
- Confirmation of the address owner with a Bitcoin account signature
- Access to the Bitcoin Wallet only with a password
- Securing and managing private keys
- Sending send and receive addresses in the address book
Every wallet has a public key, with the help of which digital keys Coins are sent from one person to another. The public key acts as the recipient's wallet address. The private wallet key (private key) enables the recipient to access the bitcoins. The two keys represent a one-time generated character string. If the keys are lost, the owner loses access to his credit.
A Bitcoin wallet largely corresponds to a client, comparable to an email provider such as Outlook or Gmail. On the Bitcoin portal bitcoin.org, the Bitcoin investor can choose from over 20 different wallets suitable for the respective purpose.
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Different types of wallets
Die Wallet is available in the application categories desktop, hardware, mobile and web. Recommendations for a Bitcoin wallet are listed on bitcoin.org and in every legitimate Bitcoin wallet comparison.
The desktop wallets include:
- Bitcoin Core
- Bitcoin Knots
Hardware wallets include:
- Ledger Nano S
The Wallet Mobile (Android and iOS) includes:
- BitPay Wallet
The web wallets include:
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Transaction fees for a Bitcoin Wallet
Basically, it is a participant in Bitcoin networks leave it up to them to charge a transaction fee. Toll-free transactions or transfers with low fees have a time disadvantage because each transaction has to be confirmed. The transaction fee is a form of reward for the Bitcoin miner or block producer.
General consensus is a fee of 0.0005 BTC for confirming transactions such as buying Bitcoin. A mere forwarding of a transaction to Bitcoin user clients is charged a fee of 0.0001 BTC.
In most Bitcoin wallets there is therefore a pre-set minimum fee of 0.0001 BTC per transaction. In practice, it is not uncommonly many times higher.
The transaction fee depends less on the transaction volume, but primarily on the transaction size in kilobytes. All transactions under 10 kBytes and sending Bitcoin from 0.01 BTC should be free of charge. A strong increase in the value of bitcoin means an immense increase in fees.
With the increase in bitcoin transactions and the defined, small block size of 1MB, a timely execution of many transactions cannot be ensured, which ultimately leads to an increase of fees. Bitcoin users who commit to a certain time execution of transactions charge a higher transaction fee.
High transaction fees are a real problem for the Bitcoin community. Calculations on transaction fees on the Bitcoin network and VISA credit card network show that Bitcoin transactions cost more than three times as much as VISA transactions. On average, the fee for sending a euro over the Bitcoin network is around 1.5 percent.
Why is the wallet for Bitcoin necessary?
In the still young The past of cryptocurrencies has already come true several times: "Anyone who has access to the address key also has the coins". In order to be in control of your own Bitcoin, the key pair (public and private key) must be the sole property. When buying Bitcoin on a conventional crypto exchange, the crypto assets are credited to the user account. In return, control over the associated private keys is left to the provider.
Your own Bitcoin assets are not secure on the exchange, as various exit scams and hacker attacks prove. Examples are Mt. Gox Exchanges, Cryptopia and Binance. At Binance, hackers captured 7,000 Bitcoin, although it is considered one of the safest trading places for digital currencies. The Exchange Wallet hack clearly shows the importance of never giving up control of private keys. It can be assumed that many exchanges will not be among the designated specialists in cyber security in the near future.
Which is the best Bitcoin Wallet?
There is no general answer to the question of the best Bitcoin wallet. Here, the personal demands and plans of the Bitcoin owner primarily determine. In a Bitcoin wallet test, general suitability and security issues are examined in more detail. If a project is aimed at investing, a Bitcoin wallet that is strong in security is recommended for storing the coins. A Bitcoin Wallet recommendation is, for example, a wallet such as Bitcoin Core or a hardware wallet.
If the Bitcoin owner wants to use smaller amounts of coins for online shopping or for transfers to family and friends, there are above all Mobile wallets like Edge, Coin or Electrum. The Electrum wallet offers an additional special because it also allows offline transactions. Bitcoin users can have their Bitcoin holdings displayed in all possible currencies (euros, US dollars, British pounds, etc.) at any time. Also worth a look are mycelium for Android smartphones and Airbitz for Apple mobile devices. All of the above and other suitable Bitcoin wallets can be found on the official Bitcoin website bitcoin.org.
What to consider when choosing a Bitcoin wallet
Bitcoin can be stored in the online wallet, hot wallet or cold wallet (hardware wallet, paper wallet). The different terminology and what it is all about in detail is explained below.
The special online wallets include crypto exchanges and platforms where users can store, exchange and / or trade acquired bitcoins. Technically speaking, these online marketplaces are not wallets. Since they use a comparable security architecture, they come very close to a crypto wallet. The largest exchanges include Binance and Coinbase. They are considered relatively safe without being immune to hacking.
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What is a Bitcoin Online Wallet?
The online wallet only allows you to store bitcoins and other functions such as sending and receiving digital currencies or using an address book. As with an online mail client, the user has access to the platform with a login password and password. Logging in works via various devices from desktop PCs to smartphones.
The digital coin coins can be reached regardless of the device. The advantage for the user with this form of storage is that he never has to deal with technical requirements. To access the online wallet, for example Bitcoin.info, only a browser with an internet connection is required. For more convenience and optimal access via mobile devices, a corresponding app is usually offered, which provides a connection to the online service.
With all the advantages mentioned, risks should not be left out. When a Bitcoin holder uses an online wallet, he puts his coins in the hands of a provider. Therefore, when choosing the provider, it should be ensured that he is very popular with users because he has not yet disappointed customer trust. A transparent management and business model distinguish him. Users should always ask themselves the question of how big the possibility is to stop operating the service and to disappear with the Bitcoin assets. All care and caution, even with the most honest coin manager there is a certain risk. The increasing volume of the managed coins attracts hackers who want to use this honey pot in a fraudulent manner.
The basic risks exist to the same extent as with the e-mail account. Hackers can gain access to the login data, reset passwords from via hacked mail accounts or by attacking the servers of the email providers.
Important: Is a device-independent storage of Bitcoin is not waived, the maximum available security aspects should be included. Popular and experienced providers should be preferred. The two-factor authentication (one-time passwords in the smartphone APP or SMS code should be used as a security procedure. The user must constantly ensure that the device systems are free of viruses and malware. Only small amounts are kept in the online Bitcoin Wallet German If there is a complete loss of coins, there is no major financial damage.
What is a Bitcoin Hot Wallet?
A Bitcoin Hot Wallet is software that is based on a device is installed. The function of the application is to store, send and receive Bitcoin. The Bitcoin Wallet XYZ can be installed on a desktop, smartphone or tablet. A characteristic of this hot wallet is that private keys are stored directly on the respective device
This ensures access to the coin assets at all times and ensures that the bitcoins are kept safe without any third parties, as the device is lost a seed (12 to 24 words) is generated when the wallet is installed. The advantage of the seed is that a private key can be created on another device. Since the private key is located on a device connected to the Internet, such solutions are referred to as Bitcoin hot wallets.
The advantages of Bitcoin hot wallets go far beyond those of an online wallet. The risk is eliminated by a third party. Using the wallet on a mobile device enables great convenience. However, a user is bound to the installed device.
What are the risks?
If the device is lost and the seed cannot be accessed at the same time, the user loses his coins permanently. Since the access keys are stored on a device with an Internet connection, there is a risk that the private keys could be spied on or that external device access could occur. Private keys are not generated randomly and locally, but are generated according to a pattern known to the manufacturer. The not always easy wallet surfaces and the storage of private keys can overwhelm users, so that application errors can lead to the loss of bitcoins.
Important: Since only the user has the private key, a successful hacker attack can largely be ruled out. The provider of the Bitcoin Wallet software must ensure the generation of private keys on a device locally and randomly. Wallet software with potentially open source code is recommended. The connection of the devices to the web requires measures against viruses, malware, etc. Since the coins are held by a wallet provider, the coins can be lost if the provider disappears or if insufficient security measures are taken. Larger amounts should not be kept. These wallets for bitcoins make sense on your smartphone or PC for everyday use as a payment service.
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What is a Bitcoin Cold Wallet?
Cold Wallet is derived from the term cold storage, which describes the storage of a digital wallet on an offline platform. The platform is not connected to the internet. Examples of this are an external hard disk (hardware wallet) or a piece of paper (paper wallet).
What is a hardware wallet?
A hardware wallet is used in cold storage Use when private keys are created and saved on an offline device. Due to the lack of an internet connection, a direct attack by hacking or phishing is impossible.
In order to receive wallet coins on the hardware, the public key can be read on the device. This key can be distributed using an online device.
It becomes more complicated when creating transactions, since the signature with the private key must be used. It is also necessary to obtain some information online, such as the recipient's address or transaction fees. For this purpose, a raw (unsigned) transaction is created and transferred to the offline device.
The signing takes place on the hardware wallet. The signed transaction is transmitted to the blockchain network by an online device. Desktop PCs or notebooks are only of limited use as offline devices, since the user faces certain technical hurdles. Software updates of software on devices without Internet only work to a limited extent or with a corresponding risk.
The better alternatives are USB devices, which are easier to handle in terms of maintenance. This usually includes a seed so that the private key can be restored if the device is lost. Well-known hardware wallets are Ledger and Trezor. The hardware should only be bought in the shop of the original provider.
The advantages of a hardware wallet for Bitcoin can be seen in the form of storage. The private key required for transactions is kept completely offline. This means that the wallet is not exposed to attacks from the Internet. These wallets are suitable for long-term investments and larger bitcoin assets. Thanks to modern USB wallets for Bitcoin, offline signing is easy to handle.
Everything paletti with the hardware wallet?
There are also some risks with a Bitcoin hardware wallet. The recovery seed can be lost or spied out without the owner's knowledge. Offline devices can be infected with spyware, even if this is technically very demanding. Since manufacturers and retailers have access to the wallet, there is a risk of tampering with the device. A manufacturer can generate private keys according to a known pattern and not by accident. It is not impossible for a trader to read the seed. Buying a new seed is strongly recommended.
There is a significant risk associated with keeping the recovery seed. Here the user has to be inventive and choose the solution that is practicable for him. Written on paper, put in the safe deposit box or color-coded in a book, almost everything imaginable is possible.
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What is a paper Wallet for Bitcoin?
The paper wallet is a printed Bitcoin address, which also contains the associated private key. The address and key are generated by an external program. The user is fully responsible. The paper wallet knows neither manufacturer nor seed or hacker. It is not saved on any device. Even if open source programs are considered secure, manipulation of the script cannot always be ruled out with absolute certainty.
If the essential requirements are observed, the management of larger Bitcoin assets is sufficiently secure in the long term. It is less suitable for people who want to continuously deposit or withdraw coins.
Conclusion on the Bitcoin Wallet: digital wallets for Bitcoin investments and everyday transactions
A wallet is part of the basic equipment at Blockchain banking, specifically for the digital currency Bitcoin. There is exactly one private key (secret number) for each Bitcoin address, which is noted in the wallet by a crypto account holder. This key is also the sole basis for access to a Bitcoin address. Credit can only be received or sent using this key. Users can choose from a variety of providers. All officially recommended digital wallets are compatible with each other. Wallets are available for certain purposes and in different forms. They are offered as online, desktop, mobile, paper and hardware wallets. Users can use the Bitcoin Wallet Test to find out about the strengths and weaknesses of each digital wallet examined.
On the one hand, the best Bitcoin Wallet is one of the officially recommended applications. On the other hand, it corresponds to the personal requirements of a user. He has the choice between a suitable wallet for his Bitcoin investments or for all possible everyday transactions. An independent Bitcoin wallet comparison provides an overview of possible digital wallets with their advantages and disadvantages.
Larger amounts of Bitcoin should be kept on a hardware wallet. Only an offline device offers absolute protection from unauthorized third parties. All other wallets for Bitcoin are more or less suitable for everyday use and as payment applications.
Whoever trades on a crypto exchange Bitcoin leaves the provider at least temporarily with the Bitcoin assets intended for trading and the possible profit. Only when the coins have been transferred to your own wallet for bitcoins does the user have full control thanks to the private keys. Exchange accounts with crypto providers should not be used for the permanent safekeeping of larger coin assets.
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