A Bitcoin wallet is a digital space that allows you view, send, and receive bitcoin. It is essentially a digital equivalent of a traditional wallet, but instead of holding physical money, it holds the cryptographic keys needed to access and spend your Bitcoin. Since it doesn’t actually hold bitcoin, it should really be called a sigining device as it allows you to sign a transaction to spend your bitcoin.
There are 2 different types of Bitcoin wallets:
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Hot Wallets: These are connected to the internet and are convenient for frequent transactions. Examples include mobile apps, desktop wallets, or online wallets. They are easy to use but can be vulnerable to hacking because they are connected to the internet. For this reason, you do not want to store life-changing amounts of bitcoin on a hot wallet, but they are good for smaller ‘spending’ amounts similar to a checking account at the bank.
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Cold Wallets: These are offline wallets used for storing Bitcoin more securely over the long term. These are like a savings account at the bank. Examples include hardware wallets (physical devices) and paper wallets (printed keys, usually in a QR Code form). Cold wallets NEVER expose your keys to any internet-connected device. Even if you are connecting the hardware wallet to your computer via a cable, or you are using bluetooth to connect it to your phone or computer, the keys never leave the hardware wallet. Some hardware wallets are completely offline and never connect to a computer and instead pass data through either QR Codes, or files saved to a microSD card.
Each wallet has a public key, which acts as an address to receive Bitcoin, and a private key, which is like a password to access your funds. It’s crucial to keep your private key secure, as losing it means losing access to your Bitcoin.