What is a Bitcoin wallet and how does it work?
Just like how you carry cash around in a wallet, your bitcoin needs to be stored somewhere after you buy them off an exchange. Owning a wallet is one of first steps to take before you get started on bitcoin and other cryptocurrencies!
A bitcoin wallet allows you to store, send and receive your digital Bitcoin. They typically come in the form of software on a desktop or mobile device, or a physical device. Every wallet has a unique address, which usually comprises a long string of numbers.
Bitcoin wallets are guarded by a secret string of numbers, known as your private keys, to prevent unauthorised access to your Bitcoin on the blockchain.
Getting started on crypto? Get to know bitcoin wallets better so you know which options are more suitable for you.
Other things you need to start buying crypto in Singapore:
- An account on a registered an secure exchange to buy/sell crypto
- Identity documents required for account verification
- A valid SG bank account or Xfers account to fund your crypto trades
- Google Authenticator or any authenticator apps which allow 2FA set-up
Sign up for a Coinhako account to set up a wallet for free. Once your account is created, you will automatically get access to your bitcoin wallet and be able to buy, sell, store, send and receive cryptocurrencies.
What types of wallets are there out there? Which bitcoin wallet is best?
You need a bitcoin wallet if you intend to store bitcoin, and there are a plethora of options out there for you to choose from. Most wallets can usually store bitcoin and a wide range of other cryptocurrencies on the blockchain.
What are the different kinds of wallets out there and how do they differ from each other?
Cryptocurrency wallets can be categorised into four categories; hot or cold wallets, and custodial or non-custodial wallets.
- Hot wallets
- Cold wallets
- Custodial wallets
- Non-custodial wallets
Within these categories, cryptocurrency wallets can come in different forms:
- Mobile wallets
- Desktop wallets
- Hybrid wallet
- Hardware wallets
Custodial vs Non-Custodial Wallets
When you first purchase crypto on an exchange, the crypto ends up in your exchange wallet. Just like its name suggests, custodial wallets entrust a custodian (e.g the exchange) to hold your keys and safeguard your tokens and funds.
In other words, your crypto is left in the care of your exchange - which is why it is extremely important for you to only use well-established platforms with robust security measures to guard for funds.
Coinhako moves over 90% of customers’ funds into cold storage to ensure the best security possible for users who trade with us.
Custodial wallets grant users complete ownership over their holdings. Custodial wallets most commonly come in the form of hardware wallets that are only connected to the internet when a transaction needs to be made.
Seasoned crypto traders who have a deeper understanding of digital currencies may opt for custodial wallets, which award them full control and responsibility over their funds. This means that no third-parties (such as exchanges) are involved. Similar to cold hardware wallets, the risk of custodial wallets comes when users lose their hardware devices or forget their passwords.
Hot Wallets Vs Cold Wallets
The main difference between hot and cold wallets is that hot wallets are connected to the internet, while cold wallets are not.
Hot wallets usually come in the form of mobile or desktop wallets, and are usually the most common choice for the masses since they are simple to use. Many of them come in the form of mobile apps on smartphones, and are relatively east to set up.
If you actively trade crypto or often use crypto to pay for goods and services, you might want to consider using a hot wallet. This offers greater convenience to you as transactions can be made seamlessly with just a few clicks or touches of a few buttons.
Hot wallets are created when you sign up for an account with an exchange, or set up digital wallets through mobile or desktop platforms.
Cold wallets usually come in the form of hardware devices that store your digital currencies offline. These are non-custodial wallets which means only the owner has access to the private keys that grant access to all the holdings in the wallet.
Hardware wallets and paper wallets are common forms of cold wallets, and users only connect their wallets to the internet when they intend to make a transaction. This is one reason why cold wallets are often advertised as the more secure option, as they are less vulnerable to cyber attacks.
While cold wallets are typically quite secure, the consequences of losing or forgetting your password to your cold wallet could be financially catastrophic. If you choose to move your cryptocurrencies to a cold wallet, you should take extra precautions to store your password in a safe but retrievable place.
Yes! You can move your crypto holdings from your Coinhako wallet into a hardware wallet using the “Send” crypto function.
All you have to do is simply:
- Log in to your Coinhako account.
- Go to the "Wallet" tab.
- Select the crypto of your choice
- Click “Send”
- Enter your hardware wallet address.
There are specific instructions attached to different models of a hardware wallet. The general steps include obtaining the address corresponding to the hardware wallet. Do verify the steps directly from your respective hardware wallet provider.
We hope this article has helped you understand crypto wallets better!
How to keep my bitcoin wallet safe?
No one wants their crypto to go missing overnight, and while cybercriminals are a dime a dozen, there are a few tips you can follow to store your bitcoin securely.
We cannot overstress the importance of 2FA. This step adds an extra layer of security to your wallet, and makes your wallet more resilient against hacking attempts.
All you need to do is sync up Google Authenticator or any other Authentication app - your mobile or desktop wallets. Each time you try to access your wallet, you will be prompted to enter a 6 digit code, which you can get by launching your authenticator app.
Do note that these are time sensitive and usually refresh every 30 seconds.
🤖Install Anti-Virus Software
Setting up anti-virus software is a good way to ensure your devices are protected, and that your data is not compromised.
Cyber criminals can leverage on malware to tamper with your device, so it's advisable to run scans frequently to make sure you’re in the pink of cyber health.
Stronger passwords are harder to crack. Passwords that are used for multiple accounts or platforms may be compromised in data breaches, so it’s definitely wiser to use a fresh one.
☠️Do not click on suspicious links
It pays to be vigilant online, as clicking or accessing suspicious websites may allow malware or viruses to infiltrate your devices.
🔓Always use a secure internet connection
Avoid accessing your wallet while being connected to a public network, as these networks may be susceptible to cyber security threats, and are not as secure.
🔑Keep your private key PRIVATE (** for cold and non-custodial wallets)
Keep it private! Your private key should be for YOUR eyes only. Never share this with anyone, or give it to them to make transactions on your behalf.
We hope this article has helped you understand crypto wallets better!
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All opinions expressed here by Coinhako.com are intended for educational purposes, taken from the research and experiences of the writers of the platform, and should not be taken as investment or financial advice.