Bitcoin is the first cryptocurrency to hit the market in a big way as well as the one that laid the foundation for others to follow. It is by far the most popular crypto coin to the extent that people often use the two terms, cryptocurrency and Bitcoin, interchangeably.
What are Cryptocurrency Wallets?
In this world, a wallet is the most essential accessory that everyone carries around with them. A Digital Wallet is a program that stores personal information about payments and passwords of websites. In Cryptocurrency, a wallet is used as a gateway to a blockchain network. These wallets don’t actually store cryptocurrencies, they actually only interact with a blockchain.
How Crypto Wallets Function?
All the information one needs to use cryptocurrencies are generated by the Wallets. For example, M wants to build a new Bitcoin Wallet to receive a payment from Z. Using a Crypto Wallet Program would be the easiest way to do this. A new wallet would generate a set of keys; a public key and a private key. The program uses the public key to generate a Bitcoin address. M needs to give Z the Bitcoin address for Z to be able to transfer the Bitcoin from his wallet to M’s wallet.
Coins are only transferred from one address to another and they never actually leave the blockchain.
While it is safe for one to share their public key or address, one must never share or disclose their private key with others. One can use the private key to access ones funds and for signing new transactions. As long as one has their private key, they can use any device to access their wallet but if someone gets a hold of your private key, your funds can be stolen. The private key can also be used to recover the public key and addresses and it is a key element of a wallet.
There are two main types of Cryptocurrency wallets: Hot wallets and Cold Wallets.
Hot Wallets are wallets that are somehow connected to the internet, for example, wallets available on cryptocurrency exchanges. They are convenient for traders and frequent users as they are easy to set up and access
Cold wallets are a safer alternative to Hot Wallets. They are not connected to the internet and they physically store the public and private keys offline. They are resistant to hackers and are also known as cold storage. They are extremely convenient for long term investors.
Cryptocurrency wallets can be further divided into 3 groups; Software Wallets, Hardware Wallets and Paper Wallets. You can read about them here.
Because of the digital nature of the currency and its relative novelty, many hesitate to take the first step. So, here’s a quick checklist about what you need to look for in a good bitcoin wallet. Before that though, a word on the types of bitcoin wallets –
As far as selecting the best wallet is concerned, security is the first feature you need to look at, followed closely by the UX – the ease of navigation and trading. At CoinDCX, we use cold wallets which are further supported by features such as 2FA (2Factor Authentication) and withdrawal confirmation. We also offer high liquidity for the most popular crypto coins around the globe – and more importantly, you can use the same wallet for multiple currencies – which means you have only one wallet to track. Moreover, we are the first to integrate direct bank trading onto our platform in India. This means you can trade directly in INR through your bank account.
CoinDCX uses Bitgo – the most trusted, secure, and popular wallet with features such as SaaS (Security as a Service) platform and multi-signature technology that virtually nullifies any chance of losing your hard-earned money.
How to use Bitcoins?
In India, Bitcoin is not a legal tender. However, it opens a tremendous investment opportunity for everyone to invest in it and gain profits in the investments.
Once you have registered on a cryptocurrency exchange such as CoinDCX, you must complete your KYC and verification before you can begin trading or purchasing through your Bitcoin wallet. Trading involves purchasing Bitcoins with traditional currency such as Indian rupees and holding on to them in hope of selling them at a higher price on a later date. At CoinDCX, we facilitate a fiat transaction which means you can directly trade from your bank account. On exchanges that do not permit fiat transactions, you must purchase coins into your crypto wallet and deposit these coins as your initial investment.
You can operate your Bitcoin wallet from your mobile phone or any other device – or directly from the website of the exchange – by logging into your account. If your exchange allows fiat money transactions, your account on the exchange must be linked to your bank account for trading; or you can purchase Bitcoins in exchange for INR through your wallet.
Subsequent to the lifting on the ban on Indian banks collaborating and dealing with cryptocurrency exchanges, fiat transactions – that is trading cryptocurrency directly with INR – has become possible. The decision has also generated considerable interest among Indian investors to trade in cryptocurrencies.