Bitcoin wallets are colloquially interpreted as a medium to store Bitcoins. But, unlike the physical wallet for fiat money, BTC wallets do not store your coins. The coins rest on their native blockchain and the wallet allows crypto holders to access them. Put simply, crypto wallets serve as intermediaries between crypto holders and holdings, serving as a bridge. Every BTC wallet comes with a wallet address. Take it as the account number of your bank account. You will need the wallet address while buying with a bitcoin wallet or while receiving crypto payment in your BTC wallet.
Importance of Bitcoin wallet address
The Bitcoin wallet address is the door to your Bitcoin wallet. The address comprises a string of unique alpha-numeric code that is sometimes represented by QR code. Every individual Bitcoin wallet address is unique and exclusive.
For receiving and sending Bitcoin
If you have to receive crypto payment from someone, you will simply need to share the wallet address with the person. If you have to send Bitcoin to someone, you would need that person’s Bitcoin wallet address. It’s almost like sending money from one bank account to another. Wallet transfers happen instantly, even if the sender and receiver stay in two different countries.
For buying and receiving Bitcoin
You will need the Bitcoin wallet address even when you would be buying with a bitcoin wallet.
Crypto exchanges allow wallet transfer as a mode of payment, in addition to card payment or bank transfer. If you are planning about buying with a bitcoin wallet, you will need to submit your wallet address to the crypto exchange.
You will need your Bitcoin wallet address when you would need to receive Bitcoin after you would buy Bitcoin at a Bitcoin ATM. After you would buy the Bitcoin from the ATM, the purchased Bitcoin would be sent to the Bitcoin wallet address.
Bitcoin wallets
There are primarily two kinds of Bitcoin wallets – Custodial and Non-Custodial.
Custodial and Non-Custodial wallets
Custodial wallets are those where the custody of the wallets rests entirely with the user. Added to the Bitcoin wallet address, users get a wallet private key that serves as the unique key to their wallet account. Users should never share the private key with anyone else. These custodial wallets can be hot wallets and cold wallets. Hot wallets are online wallets while the cold ones are physical wallets. While hot wallets offer easy and fast access to crypto funds, the cold ones assure better security as they are beyond the reach of hackers. However, if you need to trade crypto or send crypto to someone else through a wallet, you would need a hot wallet as in the crypto world all operations are executed virtually. buy bitcoin
Smarter thing would be to have accounts in both online and offline wallets. However, the majority of funds should be kept in cold Bitcoin wallets only.
Non-Custodial BTC wallets are those that do not offer custody of the wallet to the user. These are usually the in-built crypto wallets hosted by centralized crypto exchanges. CEX, being centralized, is the ultimate authority of the in-built wallets. Users of the wallet only receive access to the wallet through the wallet address. The problem with these kinds of wallets is that if ever the exchange gets hacked, your wallet would get compromised as well. So, you should not keep a large amount of crypto funds in a non-custodial wallet.
A reliable non-custodial wallet will always assure optimum protection for user funds. First, a responsible exchange would generally follow cold wallet storage for user funds. Then, reliable exchanges also provide insurance for user funds stored in their in-built wallets.
Irrespective of the wallet chosen, every user here would need to link a credible payment method with the wallet for transactions. Thus, before you would create an account with a Bitcoin wallet, you have to make sure that your chosen wallet is compatible with the payment method you are about to integrate with the wallet.
Final words
When it comes to choosing wallets, there is a wide variety of options around. But, you should practice due diligence and take your time to survey a good lot of wallets before making the final call.
