Unlike traditional currencies, which can be carried in a money clip, a leather wallet, or stored in a bank safe – (or underneath your mattress), bitcoins are technically not stored anywhere. Instead, the information required to access a bitcoin balance is what needs to be stored. The location where this information is kept is known as a bitcoin wallet.
A bitcoin wallet is associated with an address and stores the credentials required to access a bitcoin balance. More precisely, bitcoin wallets store private and public keys needed to send or receive bitcoins.
Moreover, depending on the type of wallet that you are using, a bitcoin wallet can be linked to one or several addresses. Some wallets might provide a record or log of all the transactions associated with a bitcoin wallet.
Bitcoin and Cryptography
Cryptography made Bitcoin possible; thus, it is called a cryptocurrency. Bitcoin employs public-key cryptography, a system that relies on two cryptographic keys, one public and one private. A bitcoin wallet contains both keys.
Protect Your Private Keys
Access to private keys allows users to spend the balance associated to a bitcoin wallet. It is important to secure your private keys. If your private keys are lost or someone gains access to them, you could lose your funds forever.
Remember: Bitcoin is a decentralized and peer to peer network; therefore, there is no Bitcoin helpdesk. You are responsible for the security of your funds. Secure your private keys!
The public keys are used to receive bitcoins. They are obtained from the private keys, but cryptography makes it almost impossible to generate private keys from public keys. Currently, the computing power required to derive private keys from public keys does not exist. Therefore, it is important to safely store and back up your private keys.
Bitcoin Wallet Addresses are a Hashed Version of Public Keys
A wallet’s address is a cryptographically generated version of the public key that facilitates bitcoin wallets to receive payments from other wallets securely. Although they are mathematically related, it is important to note that public keys and wallet addresses are not the same. Bitcoin wallet addresses are a hashed version of public keys.
Types of Wallets
There are quite a few different types of bitcoin wallets, which offer users different features and levels of protection, security, ease, and usability. Besides storing the information mentioned above, such as public and private keys, as well as bitcoin wallet addresses, bitcoin wallets can keep a record of transactions related to a bitcoin address. This can help users keep track of their transactions.
Wallets are available in the form of software, hardware and even on paper. Bitcoin wallets that store private keys offline are usually offer the highest level of security.
Keep an eye on our blog to learn more about the different types of bitcoin wallets.