What are the functions of Bitcoin wallet

Well, the name Bitcoin Wallet itself is a sort of a misnomer. In bitcoin wallets, the wallets actually don’t hold any actual coins, those are stored on the blockchain. Rather, bitcoin wallets are a place to store private keys that give bitcoin users the right to use those coins. Every bitcoin wallet comes with minimum two keys (in the case of multi-signature wallets it can have more) one of them is public and another one is private.

The public key allow any bitcoin user to send bitcoins directly to any bitcoin address, with no middle-man. The private key needs to be kept safe because anyone who has the private key can access your bitcoin wallet.

There are various types of wallets: Web wallets, paper or cold wallets, and software wallet. I will help you understand the primary functions of each of them.

Software wallet is installed on your computer which your control yourself. Only you have access to the private keys where your bitcoins are stored. The complete blockchain download is the key hurdle of using a software wallet. Complete blockchain download is required for any locally stored bitcoin wallet.

Software wallets are more secure than web wallets, but they have better accessibility than offline wallets. Nevertheless, they are as secure as the computer they are deposited in.

Once you have downloaded the wallet software, it will sync with the network after downloading the blockchain. This may take few days to few weeks because of the size of blockchain, but once you have in on your device, sending and receiving bitcoin is very simple. All you’ll need is your public key and the public key of the recipient.

Paper wallets you can say is the closest thing to physical form bitcoin has. Public and private key can be printed out or you can also write it down, and until the computer data that stores the information is deleted, nobody can get to it.

Once your have moved your bitcoin to a paper wallet, nobody can get a hold of the bitcoins without gaining access to that paper.

While using the public key, you can send the bigger amount of bitcoins to the paper wallet without bringing it online once again. Nevertheless, if you want to spend your money, you will need that private key to be online and shift the account into an online software wallet.  

The benefit of a paper wallet is that they keep your bitcoin in a physical form by removing it from the virtual world. This way they are unreachable for using until you bring them online again.

Web wallet or online wallet could be the most convenient ways. They are run by companies that make the whole process easy for you.  Here you have to trust the third party to secure your bitcoin, which is absolutely safe to do. There are multiple functions and capabilities of each type of web wallet.

Cold Wallets are simple and sort of bitcoin wallet that is not connected to the virtual world, which means you have it offline. It can be either paper wallet or a software wallet stored on a USB drive or any other removable storage device. You can keep these wallets offline, but you can also bring them back online without shifting the complete account. The blockchain will have to be downloaded and updated but bringing it back online is no bid deal.

I think, at this point, a fast explanation of multiple signature wallets will be great. Multiple-signature wallets need two or more private keys in order to release the coin. This process adds more security, you can expect multiple-signature wallets to become a great part of the bitcoin ecosystem in the coming years.

Thanks!