A Bitcoin wallet is necessary for every transaction that requires the use of Bitcoins. The wallet works like a file which has a collection of some private keys. It is the wallet that allows you to be able to transact with other Bitcoin users. It also gives you ownership of your Bitcoin balance, allowing you to keep track of the Bitcoins you have sent and received. The wallet works just like your email, and that all wallets can inter-operate with each other.
As you know, Bitcoins make use of a public key cryptography wherein a pair of public as well as private cryptographic keys will be generated. This collection of the keys is what’s called the Bitcoin wallet.
Keep in mind that there are times wherein the term is used to refer to a kind of software which comes in the form of a digital wallet. The Bitcoin transaction that will take place will need to transfer the ownership to a new address and this is made possible through a string that has the form of random numbers and letters that are taken from public keys with the application of hash function as well as an encoding scheme. The corresponding private keys will be responsible in safeguarding the Bitcoins of the owner.
Furthermore, a valid payment message from an address should contain the associated public key as well as a digital signature in order to prove possession of the associated private key. Since anyone that has a private key will be able to spend all of the Bitcoins sent to a specific address, the essence of Bitcoin security, in this case, is the protection of the private keys.
Protecting your Wallet
Now that you are aware of the various Bitcoin wallets available for you to choose from, it’s about time that you learn how to protect your wallet in order to keep your Bitcoins safe. Remember, your Bitcoin wallet is full of cash, thus, in order to lessen the risk of loss, you must make sure to keep only a small amount of bitcoin price on your phone, computer, or whatever wallet you plan to choose. Make sure that your wallet is encrypted and if possible, it should come with an offline backup so you can still recover your wallet in the event that your phone or computer gets broken or stolen.
Encrypting your Bitcoin wallet will require that you set your password and that it must be entered before any funds can be withdrawn. But recovering your Bitcoin password is not possible in case it gets lost. It is for this reason why it is absolutely important that you remember your password at all times. If your Bitcoin value is significant, you might as well store your password in a bank vault or in an area that is highly secure. It is also important that you regularly update your mobile phone or computer’s software so as to keep all transactions safe.