Bitcoin Wallet Basics

What is a bitcoin wallet?

A bitcoin wallet is a tool through which you can access your bitcoin and other cryptocurrencies. It doesn’t “store” your bitcoin; your bitcoin is stored on something called the blockchain — more on that later. Your bitcoin is encrypted and is accessed by authorizing transactions with your private, password-like “key.”

If you’re big on cybersecurity, you may prefer a cold wallet over a hot wallet. Unlike hot wallets, cold wallets aren’t connected to the internet, so hackers and bad actors can’t access them as easily. However, their lack of internet connection may make them less convenient for bitcoin transactions. 

You can use your bitcoin wallet for sending and receiving bitcoin. Some bitcoin wallets also come with tools for accessing decentralized blockchain apps (a.k.a dapps) and lending your crypto to others.

  • Bitcoin wallets are used to authorize bitcoin transactions.
  • They are accessed through a private key which you use to access your bitcoin.
  • There are two types of wallets: offline “cold” wallets and internet-connected “hot” wallets.
  • Some wallets allow you to use your wallet to buy and sell crypto.
  • Some bitcoin wallets enable crypto lending and dapp access.

How does a bitcoin wallet work?

A bitcoin wallet is a critical component for interacting with digital assets. Each bitcoin wallet acts as a safe place to store, send, and receive bitcoin.  Here’s how it works:

  • The term “bitcoin wallet” is actually a little bit of a misnomer because a bitcoin wallet doesn’t actually hold your bitcoin. It’s not like a folder on the internet that contains the equivalent of digital cash. 
  • Your bitcoin is stored on the bitcoin blockchain. And your bitcoin wallet contains a set of the unique, encrypted keys that you need to prove ownership of the bitcoin on the blockchain. 
  •  Instead of thinking of a wallet as a storage unit, think of it as an important hub that lets you interact with both the bitcoin blockchain (where your bitcoin lives) and with other bitcoin users. 
  • The most important takeaway when learning about bitcoin wallets is that you need to keep your wallet secure. But don’t worry, this post outlines a few basic bitcoin security best practices.

What makes a good bitcoin wallet?

You’ll know a bitcoin wallet is trustworthy if it includes most or all of the following:

  • Compatibility with numerous cryptocurrencies
  • Robust security features
  • Mobile and web interfaces
  • High storage capacity for crypto and apps
  • Easy conversion of cash to crypto

How do I get a bitcoin wallet?

Bitcoin wallets are usually easy to get. You’ll typically just download an app, create an account on the app, then confirm your identity through photo ID or other means. After that, you can start buying and selling crypto.

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How do I use a bitcoin wallet?

After you get your bitcoin wallet, you’ll then get a bitcoin address you can share with others to receive cryptocurrency from them. You can also generate a new bitcoin address every time you buy or sell digital assets. Doing so makes for a more secure bitcoin experience.

Coinme Wallet 101

This section of the Coinme blog will break down all the key parts of a bitcoin wallet and highlight some critical information. We created this section to act as both a Coinme user guide and to help our users understand more about bitcoin technology. 

  • Coinme bitcoin wallets are unique in that they allow you to easily convert cash into bitcoin
  • Coinme is one of few services out there that bridges the gap between the legacy physical money system (in this case, US dollars) and the new digital money system (in this case, bitcoin).
  • An important aspect of the Coinme wallet setup is submitting a photo ID and a photo of yourself to confirm your identity. 
  • Identity verification is standard operating procedure across the financial technology world. It helps make sure that all parties involved in the creation and use of a new Coinme wallet are following all of the necessary banking regulations.  
  • If you haven’t set up a Coinme account yet, please check out this page to get started

Once your Coinme bitcoin wallet is set up you will be able to send and receive bitcoin! You will also be able to keep adding cash to your bitcoin wallet —  up to $2,500 a day.

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