By Frank Martin (MoneyAmped.com)
The bull market is upon us, and analysts expect Bitcoin to record massive gains in the coming months. As such, millions of investors worldwide have shown interest in this digital asset and plan to buy it. Are you one of them? Well, you will need a Bitcoin wallet before acquiring the coin.
But what is a Bitcoin wallet? Keep reading our guide to find answers.
Bitcoin Wallet Defined
A Bitcoin wallet is a form of digital wallet used to send, receive, and store BTC. It comes with a ‘private key’ that allows users to authorize Bitcoin transactions. That means if someone else accesses this key, they can initiate transactions without your knowledge, causing you to lose money. Therefore, avoiding sharing details of your wallet’s private key is advisable.
Types of Bitcoin Wallets
Different types of wallets for storing Bitcoin are in the market today. Determining which wallet suits your needs depends on your experience level in the blockchain industry. Here are the various Bitcoin wallets:
Software Wallets
Also known as hot wallets, software wallets come as web, mobile, or desktop apps and must be connected to the internet to function. Their ease of use makes them popular among newbies who lack enough knowledge to deal with the complexities of blockchain technology.
Software wallets can be custodial or non-custodial. For starters, custodial wallets are those whose private keys are controlled by a third party, like an exchange, meaning users cannot exercise full control over their Bitcoin. Non-custodial wallets, on the other hand, allow users to take complete control of their BTC by giving them the power to safeguard their private keys.
Hardware Wallets
Also known as cold wallets, hardware wallets are devices for managing and storing BTC. They enable users to keep their Bitcoin offline, thus shielding them from online attacks. Like hot wallets, cold wallets can be custodial or non-custodial.
A Step-by-Step Guide to Setting Up a Software Wallet
So, how do you set up a software wallet to store BTC? These are the steps to follow:
Step 1: Pick a Software Wallet
Selecting a reliable hot wallet is a crucial step. So, research the available options and download one that you find ideal from its official website.
Step 2: Register an Account
After downloading and installing the wallet app, press ‘Create New Wallet’ to register an account. You’ll be required to re-enter the displayed phase (private key) and provide a unique password.
Step 3: Deposit BTC
After registering an account with your preferred wallet, deposit Bitcoin by buying it within the app or transferring it from an external source. To fund your wallet with BTC, click ‘Deposit’ or ‘Receive’ and follow the instructions.
A Step-by-Step Guide to Setting Up a Hardware Wallet
Step 1: Pick Your Preferred Hardware Wallet
When choosing a hardware wallet, considering aspects like buying costs and features is recommended. Once you find one whose price is within your budget and meets your requirements, place an order.
Step 2: Install Required Software
Although hardware wallets store Bitcoin offline, users must connect them to the internet when setting them up. After buying your wallet, connect it to a computer and follow the steps for installing the necessary software, which will allow you to create an account and add Bitcoin.
Step 3: Deposit Bitcoin
Upon creating an account, link your hardware wallet to a brokerage or exchange account to fund it with BTC. Once Bitcoin is deposited, disconnect the wallet to keep your funds away from cyber criminals.
Tips for Keeping Your Bitcoin Wallet Safe
1. Use unique and strong passwords: To make your Bitcoin wallet difficult for bad actors to access, ensure you use a password containing special characters, numbers, and letters, not easy to guess information like your name or date of birth.
2. Activate 2FA: Enabling the two-factor authentication provides your wallet with an extra security layer. That means if your password gets compromised, the attacker will still need to obtain a verification code from your phone to access your Bitcoin wallet.
