Before anything, Bitcoin is open source software - anyone can review the code. By design, it's an open project for anyone, anywhere.
Similar to HTTP and SMTP, Bitcoin is an Internet protocol, like your browser and e-mail which you use on a daily basis, it just works.
Bitcoin is not owned or controlled by any one group or company. It is technology, decentralized and based on military grade cryptography.
The world has never seen anything like Bitcoin - indisputably a breakthrough in computer science after decades of research.
The Bitcoin Network is a global consensus network which enables a new "value transfer" system and a new kind of money. As the world's first decentralized peer-to-peer network which is powered by its users, it is fully-functional and globally secure without the need of a central authority or third-party intermediary. Thousands of nodes (computers) connected over the Internet - and all around the world - operate the Bitcoin protocol to validate transactions which occur exclusively via the network-issued and scarce currency; bitcoin.
The network; Bitcoin - capitalized B - achieves consensus every ten minutes through 1MB transaction-filled "blocks" which are timestamped, immutable, and chained together which create a globally distributed public ledger called the "block chain". The Bitcoin Network serves as the global catalyst for the financial technology revolution which is unfolding as the world begins to learn about and experiment with bitcoin wallets, digital currency, and decentralized applications.
Contrary to frequent gossip, bitcoin is 100% legal - bitcoin wallets are merely the storage technology for your bitcoin, also 100% legal.
The most intelligent and successful venture capitalists and tech entrepreneurs on the planet are working on the Bitcoin Network.
Since 2010, there has been more than USD $1.7 Billion invested into the Bitcoin eco-system, outpacing the early Internet itself.
The Bitcoin Network has been growing year-over-year within every major statistical category. And it all begins with bitcoin wallets.
To better understand bitcoin and bitcoin wallets - although not a specific technical analogy - let's first think about e-mail (Internet protocol) and e-mail accounts as a simple analogy using familiar buzz words;
The Bitcoin Network has a very similar set of bullet points, except this time you're not storing, sending and receiving an e-mail message - it's money. And you'll need to keep it safe!
It is important to note that before anything, Bitcoin is a ground breaking "technology" - an Internet protocol - which enables exciting software and hardware development on a global scale surrounding the world's first crypto-currency; bitcoin. While there has been intense, ongoing and evolving global debate surrounding the formal classification of bitcoin; Digital Currency, Property, Commodity, Private Money, Virtual Goods, Crypto Assets, etc.,. it is critical to treat and protect your bitcoin as "digital gold". Both education and security should be taken very seriously regardless of whether you're using bitcoin for domestic or international business payments, personal remittances or value transfer, online shopping or gaming, or as a personal savings or investment. At the end of the day, bitcoin is money so you need to learn how it works and how to protect it. Note: One single bitcoin (1 BTC) trades at more than DOUBLE the global markets exchange rate of one ounce of Gold.
A bitcoin wallet is essentially a free, personal "account" containing a bitcoin address which is used for sending and receiving bitcoin to and from other bitcoin wallets. Your bitcoin wallet contains both public and private keys for each one of your bitcoin addresses - and yes you can obtain more than one. In plan English, bitcoin wallets are a modern technology application or "storage" medium which facilitates bitcoin transactions on the Bitcoin Network.
Often times you will see a "QR CODE" representing a bitcoin address for quick and user-friendly scan via mobile app to send and receive bitcoin transactions. On a more technical note, your public key is not the same thing as your bitcoin address although they are also cryptographically correlated. A bitcoin wallet address is a hashed version of your public key.
As previously mentioned, bitcoin wallets hold your private keys as well, which is a randomly generated (alpha-numeric) 25 - 36 number which provides "proof of ownership" and allows you to access, spend or transfer your bitcoin to any other bitcoin address around the world. Anyone who gains access to your bitcoin private key will have access to your bitcoin. A private key is always cryptographically correlated to your bitcoin wallet address but impossible to reverse engineer, therein lies the genius, one of many, behind the Bitcoin Network.
Since we've identified that you can not buy, sell, send, trade, or transact in any way whatsoever with bitcoin on the Bitcoin Network without bitcoin wallets, we hope to provide both education and clarity as to your options and how important this foundational layer of the eco-system is to ensuring a safe experience with this revolutionary technology. Not only are there are dozens of highly funded, reputable and secure global brands which offer bitcoin wallets, there are also several specific categories of bitcoin wallets including various types software and hardware.
Remember, bitcoin is money.
If you wish to take full responsibility and manage your bitcoin directly you may wish to download a desktop bitcoin wallet on your computer. There are several reputable desktop wallets to choose from with instant access for Windows, Linux, and Mac.
By choosing a desktop bitcoin wallet you will be in control of your bitcoin so you have to be certain your machine is free of malware and 100% secure. While some individuals may suggest it would be irresponsible to trust an old computer, others suggest trusting a third-party to protect your bitcoin isn't ideal either. At the end of the day, each and every bitcoin user has a different set of technical skills and experience which help them decide on their personal threshold of risk tolerance.
Mobile wallets have one obvious advantage, they aren't isolated to your desktop at your home or office - they're mobile! Some suggest the iOS operating system is more secure than a laptop or desktop. To a lot of new bitcoin wallet users, mobile bitcoin wallets make sense for them as they may have previous experience downloading and using iOS apps from the Apple App Store or Android, from the Google App Store.
Mobile bitcoin wallets are also available for Windows Phone and Blackberry, also 100% free of charge. Regardless of whether you want to send money overseas to a friend or you are using it for a private savings account, or for a small business, mobile wallets offer a modern and flexible solution.
Keep in mind, if you have a mobile bitcoin wallet on you should enable your screen lock or thumbprint security on your device. Always be cautious. Even though mobile bitcoin wallets will have a short pin or password required before gaining access, you could lose your phone, it could get stolen, or you could accidentally delete the app, so a wallet backup is critical.
Some leading bitcoin wallets are open source software and connected directly to the Bitcoin Network. These wallets are typically very highly regarded and do not require any trust in servers - or their company - which is ideal to many users. In this particular niche category, a twelve word random phrase or "recovery seed" will be presented to you upon downloading the app. This secret phrase needs to be written down and kept in a safe place as it is essentially "access" to your bitcoin and will allow you to restore you wallet in the event of an unexpected emergency.
We've covered both desktop bitcoin wallets and mobile bitcoin wallets, but what about a universal or "web wallet" for bitcoin? For a variety of reasons, web wallets are extremely popular for users, typically a popular type for new and intermediate-skill users of the technology. With any web bitcoin wallet you can access your bitcoin by visiting a secure company website. Similar to your email or financial institution, you gaining access via a "login user name" (or e-mail address) and your secure password. Prior to gaining access, most web wallets today require a unique and secure pin code or 2FA (two-factor authentication) for an extra layer of protection.
Anyone interested in bitcoin and looking into their first bitcoin wallet should diligently research first - and choose a web wallet wisely - due to the fact you are trusting a third-party to keep your bitcoin secure. Many people refer to web wallets as a "bitcoin custodian" or "bitcoin bank" which provides your basic account services, acting as the real-time manager of your funds. We are not suggesting by any measure you should ignore and avoid web wallets, we are merely distributing relevant and useful information to help you better understand the industry and your options. Just as with any industry, not all industry brands are considered equal. Ultimately it is your exclusive responsibility to learn and investigate which pros and cons exist for any particular wallet, including but not limited to, historical security issues, documented venture capital, support availability, verified reviews, additional online resources and support and of course their actual wallet structure from a technical perspective.
That said, the bitcoin industry has significantly evolved over the years and the subsequent developer interest, innovation, and user-experience has dramatically improved. Many web bitcoin wallets offer a "vault" or "cold storage security" where your bitcoin is held in offline servers. Some bitcoin wallets even provide multi-signature security for advanced users.
Believe it or not, some web bitcoin wallets have grown larger than some traditional banks in size and scale, are insured, and in a few cases are backed with $25M - $100M USD in venture capital funding which leave some of the most popular bitcoin wallets boasting market valuations of $50M, $250M and even $1 Billion USD proving their organization, security, execution, and the explosive growth - based on global demand.
For many millions of new users experiencing the Bitcoin Network for the first time, web bitcoin wallets are likely going to be the go-to option as it presents a user-friendly environment. It's important to keep in mind that even if you use a start out using a web wallet, you can always - without penalty, permission, or delay - send your bitcoin to another wallet type or brand if you are unhappy for whatever reason. Once you get the hang of it, it's as easy as sending an e-mail.
There's no doubt hardware wallets are growing in popularity all around the world. Proof of that bold statement stretches beyond gossip, tweets, and forum posts. The fact is, the bitcoin hardware wallet manufacturers literally can not keep them in stock.
People from all over the world are realizing that the Bitcoin Network is the largest financial technology breakthrough in many decades, and although still new and experiencing growing pains, it has proven both interesting and valuable - leading to people wanting to learn more and get involved. With that being said, the first step to understanding bitcoin is that you need to keep it safe. Just like your physical gold, although large quantities are not typical, or let's just say a rare gem and diamond collection, extremely rare art work, or even physical cash - you need to keep it safe.
Hardware bitcoin wallets are personal handheld devices, across the board smaller than a mobile phone in size, which allow users to store their bitcoin offline. The idea behind the technology and growing demand is that many people do not want their bitcoin being held on their mobile phone or personal computer which could be lost, hacked or stolen. And others, sometimes based on ideology alone, would rather not trust a third-party bitcoin wallet provider with their bitcoin. So, with little other options, some users opt for a secure hardware bitcoin wallet. Users who choose this bitcoin storage route simply buy bitcoin on an exchange and then send it to their hardware wallet device.
While this may be a popular avenue for more experienced or technically advanced bitcoin users, it isn't necessarily rocket science either - you can do it! Now here's the real kicker for you; Bitcoin hardware wallets aren't 100% free of charge like desktop, mobile, and web wallets are. If you're in the market for a hardware wallet for your bitcoin holdings expect to pay somewhere between $35 - $250 USD for your new security device.
While some people like the idea of a physical hardware device they can store away in their safety depot box or gun safe, you can do the same thing with paper bitcoin wallets, except it's not a secure hardware device, it's merely a piece of paper - with your bitcoin! Although it may sound elementary, it will require some extra research and some patience. Nonetheless, you can create your own bitcoin wallet address online and print out your bitcoin private keys. Remember, as with any of the bitcoin wallets, having a safe and secure operating system, computer, and connection is mission-critical to ensuring a safe bitcoin experience.
Although using bitcoin paper wallets are a unique cold storage security option which enables you to have complete control over your bitcoin, please keep in mind "paper and ink" are still merely - paper and ink. Many bitcoin users who favor this type of bitcoin wallet keep their document in an sealed envelope, plastic wrap, or even laminated for safe keeping. That said, this type of wallet isn't for everyone.
Some bitcoin users suggest using your creative mind and memory over companies and devices. As wild as it may seem, some people are using this type of bitcoin wallet; a brain wallet. The concept originally began as simply memorizing a group of specific keywords which were then converted to a private key by a key derivation algorithm (example: SHA256) which was turned into a bitcoin public address. Complicated? Yes.
Some users continued down the path of their personal opinion and version of "ultimate security" with mnemonic peg - creating a random "fairy tale" or short story which highlight specific words which make up the "phrase of words" which are then turned into your private key. Ultimately, regardless of how creative this may be, we urge all users to use extreme caution when creating brain wallets for your bitcoin. Anytime you're dealing with bitcoin you need to understand the reality that there is no recourse upon any user error when creating a bitcoin wallet using a complex method.
While bitcoin wallets may seem overwhelming, you can't bypass them - they're required for ownership. Dedicate some time to learn about this emerging industry.
Be sure to review all of the various brands - and categories - of bitcoin wallets available, but please remember to exhale! There's absolutely no need to stress or rush.
When you're comfortable with a bitcoin wallet provider, go for it! But remember, if you're not happy with it, moving your bitcoin to another wallet takes only minutes.
Remember, bitcoin is money. Be sure to secure your bitcoin wallets by following best practices and common sense the same as you would with any other valuable assets.
BitcoinWallets.com is the official global resource for all-things bitcoin wallets. Our exclusive aim is to help bridge the consumer education and marketing gap for humanity as a premium, intuitive and authoritative on ramp to the Bitcoin Network.
We hope to serve - and dramatically help expand - the growing ecosystem by providing up-to-date and comprehensive information including the official global bitcoin wallet directory, venture capital statistics, user-submitted bitcoin wallet reviews, as well as other relevant industry resources, news, jobs, and shopping links.
We invite any-and-all friendly and constructive criticism to help grow our BitcoinWallets.com brand.
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