Bitcoin is one of the most profitable cryptocurrencies, with a market cap of over $1 trillion. This cryptocurrency not only achieved unbelievable thresholds by surpassing $60,000, but it also boosted the popularity of other altcoins on the crypto market.
Today, the perspective of most institutional investors, as well as governments and organizations regarding cryptocurrencies, is much more positive, and they are looking to add these assets to their portfolios and encourage better conditions for crypto trading and crypto businesses.
But there is one essential component, and without it would be impossible for BTC to be traded on any platform, and that is a crypto wallet. Let’s take a look at why crypto wallets are important and how they work.
What is Crypto Wallet?
A crypto wallet is a software program where your BTC is stored, and each crypto wallet has a private key along with the public address of the crypto wallet. When it comes to the transfer of BTC, it happens basically between two crypto wallets on the blockchain network. It doesn’t matter what type of wallet the user has because all of them have private and public keys and are doing the same function of keeping your BTC safe. Some of the forms of crypto wallets are desktop, hardware, mobile, web, and other storage options.
The difference in the format as some need to be connected to the Internet in order to function and the others are considered cold storage options because they are not connected to the Internet. For example, hardware wallets are considered a cold storage option because you use them to store your BTC, and they are specifically considered very secure. The wallets that are connected to the Internet are also known as hot wallets, and they are more accessible, cheaper, as well as convenient for daily use or trading.
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Mobile and web wallets are used for online purchases and trading. The only difference is that the mobile wallet is basically another app that you download on your phone, and it can also be used for offline shopping; while the web wallet, it is not considered that safe because its public and private keys are stored on the server of the provider of the wallet. Still, they are most convenient and accessible, and most trading platforms offer one as part of their services.
How You Use BTC Wallets
First, private keys are also known as seeds, and they are used to sign the transactions, and by doing so, the mathematical proof is generated that this transaction was initiated by the owner of the wallet. The private keys are also important because it prevents anyone from altering the transactions. After the BTC transaction is initiated, it is sent to the blockchain network, where through the mining process, it is validated or processed within 10 minutes.
On the other hand, the public address of your wallet, which corresponds with the private key, is used for receiving BTC transactions. The public address is displayed as a random string of alphanumeric characters, and it is not completely anonymous, as data about the transactions are transparent in the network. Also, if you are a business owner, regardless if you have an online shopping site or brick-mortar store, your customers would need to know your public address in order to make purchases.
Source: Analytics Insight
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