When talking about wallets, one automatically knows that it stores money, credit cards, IDs and other personal effects that will fit in that small foldable leather invention. However, when talking about Bitcoin SV wallet, it becomes a totally different thing.
A cryptocurrency wallet does not exactly store Bitcoin in a way that a real-life wallet holds money. Bitcoin SV exists as a transaction record on the blockchain, which is the globally distributed digital ledger that holds a history of all Bitcoin transactions. Bitcoin SV does not live anywhere else but within the blockchain.
So, what does a Bitcoin wallet do?
A cryptocurrency wallet is a device that facilitates the sending, receiving and managing of Bitcoin accredited to addresses within the blockchain. It is because when one sends Bitcoin SV to another person, the owner transfers possession of the coins from one address to another.
To be more specific, a cryptocurrency wallet holds public and private keys that communicate with the Bitcoin SV network. The public and private keys are then used as a basis to generate an alphanumeric identifier, which is actually the “address” being referred to earlier. It is called so because it points to a precise location on the Bitcoin SV blockchain. The address is actually what people send to each other in Bitcoin transactions.
The private and public keys must match for a Bitcoin transaction to be marked as completed. The public address must be owned by the private key. The transaction must be digitally signed by the sender and registered on the blockchain. Private keys must be kept secret, only the owner should know it. If it is not secured, the owner takes the risk of getting his or her Bitcoin SV stolen.
What are the different types of cryptocurrency wallet?
First, it must be clarified that wallets only interact with the Bitcoin SV network, they are not part of the network itself. They are software tools that are used to transact Bitcoin. And there have been different kinds of software that were designed to make transacting Bitcoin easier. Below are the most common ones.
- Web-based wallets use browsers to interact with the Bitcoin SV blockchain. One has to go to the cryptocurrency exchange website, register and create a password to secure their account. This needs a stable Internet connection for the transaction to go through. The problem with some web wallets is that private keys are stored on centralized servers, which are prone to hacking.
- Desktop wallets are software downloaded and installed on a personal computer. Users have full control of their private and public keys, as well as their funds. However, it is still vulnerable to hacking and cyber theft if the computer is infected by a virus or malware. The bigger risk when using a desktop wallet is that once the computer is damaged and the hard drive is erased, all coins are lost. The solution is to always have a backup or two of the wallet.dat file in an external hard drive.
- Mobile wallets are the most popular and most convenient tool when transacting Bitcoin SV. Users can transact anywhere using the wallet app installed in their mobile devices. Like desktop wallets, mobile phones and tablets can also be hacked and data can also be erased.
People can choose which one of these types best suits their needs. Just remember that securing keys and passwords and creating backups always work best to counter the risks these wallets pose when transacting Bitcoin SV.
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