Bitcoin wallet

A Bitcoin wallet is a digital safe where you keep your Bitcoin’s private keys and public addresses. These keys are like your password and your username for your Bitcoin funds. The wallet itself doesn’t physically hold your Bitcoin; instead, it keeps track of your ownership and interacts with the Bitcoin network to manage transactions.

How does a Bitcoin wallet work?

At its core, a Bitcoin wallet functions as a digital interface that allows you to interact with the Bitcoin network. Here’s a detailed look at the inner workings:

1. Key generation

When you create a Bitcoin wallet, it generates a pair of cryptographic keys for you:

• Private key: This is a secret alphanumeric string that you use to sign transactions and prove ownership of your Bitcoin. The private key must remain confidential and secure because it gives access to your funds.
• Public Key: Derived from your private key, the public key is used to create your Bitcoin address. This address is what you share with others so they can send Bitcoin to you. The public key is visible and can be shared freely.

Click here to read more about public and private key 

2. Address creation

From your public key, the wallet generates a Bitcoin address. This address is a shorter, user-friendly version of the public key and is what you use to receive Bitcoin. Think of it like your bank account number, which you give to others for deposits.

3. Transaction signing

When you want to send Bitcoin to someone:

• Initiating a transaction: You enter the recipient’s Bitcoin address and the amount you want to send into your wallet.
• Signing the transaction: Your wallet uses your private key to sign the transaction. This cryptographic signature ensures that you’re the legitimate owner of the Bitcoin being sent and authorizes the transfer.
• Broadcasting the transaction: Once signed, the transaction is broadcasted to the Bitcoin network. This involves sending it to a network of nodes (computers) that validate and propagate the transaction.

4. Transaction verification

The transaction is picked up by miners in the Bitcoin network. They validate the transaction by checking the signature and ensuring that the Bitcoin being sent is not already spent.

Once validated, the transaction is included in a block by miners. This block is then added to the blockchain, a public ledger that records all Bitcoin transactions. Each new block confirms and locks in previous transactions.

5. Balance tracking

Your Bitcoin wallet doesn’t store your Bitcoin directly but keeps track of your balance by referencing the blockchain. It monitors the blockchain to see how much Bitcoin you own based on the transactions recorded.

When you receive Bitcoin, your wallet updates your balance by looking at the blockchain to see which transactions have been credited to your address.

Types of Bitcoin wallets

Bitcoin wallets come in various forms, each with its own features and security levels. There are mainly two types of bitcoin wallets: Hot wallet and cold wallet. Let’s find the difference between these two.

Hot wallets vs. cold wallets: What you need to know

Whether you’re buying, selling or simply holding onto your crypto, you’ll need a secure way to store your private keys. This is where hot wallets and cold wallets come into play. Let’s break down what each type is and how they differ.

What is a Hot wallet?

A hot wallet is a type of bitcoin wallet that’s connected to the internet. Think of it as a digital vault that’s always online, allowing you to access your funds whenever you need them. Hot wallets come in various forms—software apps on your phone or computer, web-based wallets and even exchange wallets that live on trading platforms.

The primary advantage of a hot wallet is convenience. Because it’s connected to the internet, you can quickly send, receive and manage your cryptocurrencies from anywhere. This makes hot wallets ideal for frequent transactions.

However, this online connectivity also comes with risks. Hot wallets are more vulnerable to hacks and malware since they’re always accessible via the internet.

Here are hot wallet examples:

Online Bitcoin wallet

Web wallets are one of the most commonly used types of wallets in the community. An online bitcoin wallet stores your private key in a server owned by the company that offers such services. Different companies offer different features and web wallets allow you to access your bitcoins anywhere and anytime. The downside is that the security of your web wallets lies completely with the company.

Desktop Bitcoin wallet

A desktop wallet is a software you download and install onto your computer. This type of wallet stores your private key and other pertinent information on your hard drive. This makes it more secure than web wallets since you don’t have to rely on another company to keep your wallet safe. These are a great solution for beginners and traders that own a small amount of BTC.

Mobile Bitcoin wallet

Like a desktop wallet is software on a computer, a mobile wallet is an app on your smartphone. This app stores your private keys on your smartphone and allows you to pay for things or transfer bitcoin directly from your phone. Just like web wallets, they are an easy-to-use, convenient solution for on-the-go bitcoin transactions, but are quite vulnerable to hack attacks.

What is a Cold wallet?

On the flip side, a cold wallet is a bitcoin wallet that’s entirely offline. This means it isn’t connected to the internet or any other device, making it a fortress of security for your private keys. Cold wallets typically come in two forms: hardware wallets, which resemble USB drives and paper wallets, which are just physical printouts of your keys.

The major benefit of a cold wallet is its heightened security. Since it’s not online, it’s immune to online attacks and hacking attempts. Cold wallets are perfect for long-term storage of large amounts of cryptocurrency that you don’t plan to access frequently.

However, this increased security comes with the trade-off of convenience. To use the funds in a cold wallet, you need to transfer them to a hot wallet first, which can be a bit cumbersome.

Here are some examples of cold wallet:

Paper Bitcoin wallet

A bitcoin paper wallet is probably the safest option when it comes to susceptibility to hack attacks and malware. It is a piece of paper that has a bitcoin wallet address where you can receive bitcoins and a private key which you can use to send bitcoins. Websites like BitAddress allow you to create a randomized public address and private key which you can then print and use immediately. Obviously, while paper wallets are impervious to digital threats, it is important to protect the piece of paper from real-world threats and theft. It is a free bitcoin wallet.

Hardware Bitcoin wallet

A bitcoin hardware wallet stores your private keys in a secure hardware device. This is the most secure way to store bitcoins. Hardware wallets are unaffected by viruses and can be used securely to transfer bitcoin. Unlike the others, this is not a free bitcoin wallet. Buy a model from a trusted manufacturer, like the Ledger Nano S or the Trezor White and you’ll be all set to transact bitcoins.

Hot wallet vs. Cold wallet: Key differences

Choosing between a hot wallet and a cold wallet depends on your needs. Here are some key differences between hot wallet and cold wallet:

• Connection: Hot wallets are internet-enabled, making them convenient for transactions but more susceptible to online threats. Cold wallets are offline, offering superior security but requiring more steps to access your funds.
• Usage: Hot wallets are ideal for active trading and daily transactions. Cold wallets are best for storing large amounts of cryptocurrency that you don’t need immediate access to.
• Security: Hot wallets are more vulnerable to hacks and malware due to their online nature. Cold wallets are considered safer because they are not connected to the internet.

Here are the steps to open your free bitcoin wallet:

Getting started with your FreeBitco.in wallet is quite easy and seamless. Complete the following steps to set up your wallet:

Sign up or login if you already have an account

Once you click on the Sign-up button, you will see a pop-up window and you will be asked to enter your email ID along with a password. You would be asked to solve a captcha as well.

In the Login pop-up, you will be asked to enter your email or Bitcoin address and the password along with a two-factor authentication code, which is completely optional.

FreeBitco.in automatically creates a Bitcoin wallet for you, in seconds!

Start depositing in your bitcoin wallet

There is no minimum deposit amount at FreeBitco.in. You can deposit as much as you want, which will be credited to your account instantly after 1 network confirmation. But you need to double-check the deposit address as it is unique and you risk losing your bitcoins if you input a wrong address.

Easy withdrawals of your bitcoins

To withdraw your Bitcoins from the wallet, there will be three options, namely auto, slow and instant withdrawal. You need to select one and proceed accordingly.

Here is more information on how to open your free bitcoin wallet.

What is the best Bitcoin wallet?

Choosing the best bitcoin wallet is easy – all you have to do is take into account your requirements, your store of bitcoins, your budget (if any) and your future plans with the cryptocurrency. If you’re a beginner, a web wallet or a desktop wallet should be enough for you to store your first bitcoin.

If you fear hackers and have trust in your ability to protect a piece of paper at all times, a paper wallet is a great option. If you have been doing this bitcoin thing for a while and are looking for a wallet upgrade, there’s no better option than investing a couple hundred bucks and getting yourself a hardware wallet. There are plenty of amazing options to choose from, so choose wisely. All in all, choosing the best bitcoin wallet is dependent on you.

Top bitcoin wallets:

Bitcoin traders should store their coins in high-quality wallets; otherwise, they could lose all their funds forever. They should also control the Bitcoins in their wallet, rather than giving control in the hands of any third party. However, it is not really the Bitcoins that traders control; instead, they control the private keys for the Bitcoin transactions they make.

The most important part of trading Bitcoin is security. If a Bitcoin exchange gets hacked, the Bitcoins of traders in that particular exchange will likely not be retrieved. So, they need to analyze the pros and cons of every wallet and select the best wallets that suit their requirements. The top 5 Bitcoin wallets are highlighted below for enabling the traders to make the correct decision:

• FreeBitco.in: It is a great example of a Bitcoin faucet that provides you interest on your balance and gives better reward points as well as free lottery tickets to the users. Using FreeBitco.in you can win up to $200 every hour by just playing free spins or simple Hi-Lo games.
• Trezor: It is the best and secure Bitcoin wallet in the market today. It is a hardware device that operates more than 9 cryptocurrencies, including Bitcoin. It possesses security features like a password manager, two-factor authentication, restores private key and other beneficial characteristics.
• Electrum: It is a reliable Bitcoin wallet with an automatic interface and easy transactions. Even a novice trader can use this wallet without taking much effort. The privacy of funds is highly maintained by two stages of encryption. No data of the users are stored online, only the users control the keys and Bitcoins.
• Exodus: It is a software wallet with features like private key encryption and an intuitive user interface. It offers multiple device compatibility, such as desktop, mobile and other hardware devices for its users. It does not associate user information in the exchange, as there is no account in Exodus.
• Ledger Nano S: One of the best Bitcoin wallets at the lowest price. It offers unique features like supporting a wide variety of cryptos, easy portability, simplistic procedures, etc. It is trusted by many traders for its malware protection and its OLED screen. Bitcoin traders can easily carry it because its size is too small and it looks like a foldable USB device.
• Mycelium: It is the default Bitcoin wallet that was granted the best mobile app award by Blockchain.info in 2014. The wallet’s open protocol allows secure authentication with backup facilities. Traders can securely store large amounts of Bitcoins with this wallet.

Why open bitcoin wallet with Free Bitcoin

An additional advantage of using the free bitcoin wallet is that it is not just a wallet. You can earn a significant number of Bitcoins as an interest on your account balance every day. If you maintain a minimum balance of 30,000 Satoshi (0.0003 BTC) in your account, a compounded interest on the full balance of your FreeBitco.in account will be credited daily. You can also earn a 25% commission on the interest amount earned by your referrals.

Experts suggest not storing all your Bitcoins on the same wallet device or platform if you hold a significant amount of funds in your account. Consider multiple wallets for storing your Bitcoins in the long run.