Before buying bitcoins, you need a place to store them. This place is commonly called bitcoin wallet.

But not everything is the same. There are many types: You can store your cryptocurrencies on your computer or mobile, on a physical device or even on a sheet of paper. But not all are equally safe. The best place to store is the bitcoin wallet.

What is a bitcoin wallet?

A bitcoin wallet is the place where bitcoins or cryptocurrencies are stored. It would be the equivalent of a bank account, although it has multiple advantages.

The main one of all is decentralization: There is no middleman; neither agencies nor banks. A bitcoin wallet belongs only to you. But also, they are much easier to create than a traditional bank account.

The truth is that wallets are not a virtual space where your bitcoin is stored. Cryptocurrencies are stored on the blockchain and wallets securely archive access data to the exact place where your bitcoins are located on the blockchain.

The goal of the wallets is to make such access to the blockchain more intuitive.

Get to know the importance of bitcoin wallets to store your bitcoins

How to use

The operation of a bitcoin wallet is fundamentally based on two concepts:

A public key; that you can freely share. It is used to add bitcoins to the wallet.
A private key; that you should NEVER share. It is used to extract bitcoins from the wallet.

All bitcoin wallets have these two keys. However, some current wallets, such as online or mobile wallets, only show the public key to add bitcoins.

When you remove your bitcoin from the wallet, the private key is automatically entered by the application you are using, which makes it easier to use. Even if you don’t see it, it is stored and managed by said software.

It is very important to keep your wallet keys and passwords in a safe place. If you lose them, it is like losing money and the bitcoins it contains can never be recovered. Nor should you share your private key, if someone knows it, he could take the money out of your wallet at any time.

Before using any Bitcoin wallet, it is advisable to test with a small amount of cryptocurrencies, to learn how to use them and avoid scams. It is convenient to do it both when saving money, and when spending the bitcoin of your wallet.

How to create a bitcoin account

Although many people call it a bitcoin account, as you have already seen, what you really need is a wallet for cryptocurrencies. To create a bitcoin wallet, all you need to do is register in some of the options available on the market, depending on the one that suits your needs. Once registered, you will have a public and a private key, and you can start trading bitcoin.

In general, bitcoin wallets can be divided into two groups:

The “cold wallets” or cold purses that are NOT connected to the internet. Paper wallets or hardware wallets are considered cold wallets. They are also called offline virtual wallets.
The “hot wallets”, online wallets or hot wallets that work online, connected to the internet. Web wallets, desktop wallets, or mobile wallets are hot wallets.

Cold wallets are much safer, but more complicated to use. It is recommended to keep your long-term investments in them or the bitcoins that will not be used for a long time.

On the other hand, in hot wallets it is advisable to store the bitcoins that you use for trading like on the bitcoin revolution website or that you plan to use in a short time. Choosing a bitcoin wallet will depend on the strategy you are going to follow.

iLounge author Lucy Bennett

Lucy Bennett is a Contributing Editor at iLounge. She has been writing about Apple and technology for over six years. Prior to joining iLounge, Lucy worked as a writer for several online publications.