Understanding The Use Of The Bitcoin Wallet!

How to Store Bitcoins and make Transactions?

In order to send, receive or transfer bitcoins you must have a digital wallet.A digital wallet is a wallet that contains all the passwords of the user’s bitcoins and where they are to be stored and synchronized while sending or receiving. Wallets are of two types:-

  • Hot wallets-This bitcoin wallet is stored over the Internet and allows instant transfer through blockchain.
  • Cold Wallets-These wallets are stored offline on the user’s computer. These wallets provide greater security but the transaction process is longer.

In order to receive bitcoins, you have to provide the sender with an address. An address is an alphanumeric sequence starting with ‘1’ or ‘3’ and is a unique identifier that sends the payments directly to you, you only.

bitcoin wallet

Management

Unlike real currencies such as $, £, ₹, or ¥, bitcoins are not controlled and regulated by any bank or government. Bitcoins are managed using Blockchain technology. Blockchain is a shared public ledger that records every transaction made using bitcoin. The integrity & chronological order of blockchain is managed using highly stringent cryptography rules. These rules thwart any attempts to interfere with previous transaction history stored in blocks. Mining is a distributed consensus system that is used to confirm transactions by including them in a block. A number of such blocks form a chain and hence the name blockchain.

Risks

Due to the nature of the origin & functioning, bitcoins may be used for black market transactions, money laundering, illegal activities or tax evasion. The lack of uniform regulations raises questions about their longevity, liquidity, and universality. There is an added threat from hackers, malware and operational glitches. There is also the risk of fake bitcoins apart from price manipulations. There is even the threat of a better virtual currency.