Before diving headfirst into Bitcoin investing, learn how does a Bitcoin account work so that one can understand how to access and use the coins purchased.
Bitcoin has become a common term in society. Most people, irrespective of whether they are into investing, know about Bitcoin and altcoins. But when one wants to start investing actively in cryptocurrency, just knowing the name of this digital currency won’t suffice. One would have to learn everything about it before taking any market position.
Bitcoin wallets are one of the significant components that one needs to understand. Questions like how does a Bitcoin account work, what private keys mean, and where does this currency get stored and used for transactions? Here are some basic things to know.
So, if one has similar questions in their mind, then they are in the right place. Let’s dive into the Bitcoin world.
How does a Bitcoin account work: Storing Bitcoin
One has a physical wallet or a bank account to store money. Similarly, Bitcoins have digital wallets as a storing place.
A Bitcoin wallet does not have a physical appearance like an actual wallet or a bank. It is a type of digital computer software that acts as a linkage between a crypto investor and the Bitcoin network. Every owner will have a unique address with the same utility as a bank account number. This unique combination of alphabets and numbers is required to make Bitcoin transactions like a bank account number.
Apart from this unique address/public key, there is another critical component of a digital wallet: a private key. As the name suggests, it should not be shared.
An easier way to understand the public and the private key is that the public key is one’s home address. It can be shared with people for deliveries. And the private key is the house key. One does not want the key in somebody else’s possession as they will access the digital funds.
What are the types of Bitcoin wallets?
There are four types of Bitcoin wallets-mobile wallets, desktop wallets, hardware wallets, and web wallets. Learning about them will give an idea of how does a Bitcoin account work.
A Mobile Bitcoin wallet is similar to the usual digital wallets people use to pay online. It is compatible with iOS and Android platforms. One good thing about these wallets is they allow quick payment mode in physical stores by scanning QR codes or through NFC (Near Field Communication).
Desktop wallets get downloaded on the laptop or desktop, and the system can be used to access the digital wallet. But people advise against this wallet because of its weak safety protocol. If the computer gets compromised, one’s funds are in danger. This is also another reason why one should know how does a Bitcoin account work.
Among all the wallet options available, the hardware wallet is the most secure type of wallet. The reason is that the private key is stored in a physical hardware/device. Therefore, no one can hack into it with internet access. These wallets are immune to any cyber or virus attack. The device is like a USB device; plug the device into a system and make transactions.
As the name suggests, a web wallet is more of an online service. It will work on behalf of the owner to make transactions. A plus point of this wallet is that it enables one to pay from any device. But just like desktop wallets, these are not the most secure way of storing Bitcoins.
Hopefully, it is clear how does a Bitcoin account work?
Setting up these wallets is not as complicated as understanding how does a Bitcoin account work. Just download the software from the provider’s website and follow their instruction to the T, and by the end, the wallet and account will be live and ready for Bitcoin transactions.