Bitcoin wallets are like regular bank accounts. You can use them to store money, carry out transactions, and make exchanges. Today, having a Bitcoin wallet is a wise investment decision, but is it possible to have more than one?
Fortunately, you can have multiple Bitcoin wallets. Having different wallets for Bitcoin is a reliable way of leveraging gains while reducing and controlling risk. Bitcoin wallets help you receive Bitcoins, sign transactions and check your account balance.
This article will look at the different Bitcoin wallets available out there. You will also read about some of the risks you are bound to encounter if you have just one wallet. I’ll also talk about why you, as a crypto investor, are advised to have more than one wallet for your Bitcoin.
What You Need To Know About Bitcoin Wallets
Bitcoin wallets are digital wallets used to make Bitcoin transactions. They contain crypto information used to access the coins in a particular Bitcoin account.
A Bitcoin wallet runs on a random number generated to complete a certain transaction. Depending on the algorithm requirement of the transaction, the random number is converted to a private key under specific conditions.
You’ll typically use the private key to control and send your Bitcoin assets to other entities. The private key also generates another key, called the public key and used by third parties to receive Bitcoins.
Bitcoin wallets don’t store the actual Bitcoins. Instead, they keep the private keys that control a specific blockchain address.
A majority of Bitcoin investors use several Bitcoin wallets. But why have multiple wallets of the same thing in the first place? Let me explain.
Bitcoin transactions are supported by a blockchain ledger that records all transactions that happen. The ledge keeps this information anonymous despite the fact that it is still visible. If you have a single Bitcoin wallet that controls a high amount of money, you will attract attention from plenty of people.
Even though your identity remains concealed, it can be uncomfortable having people watch your wallet because you’re moving large amounts of money online. This is why it’s beneficial to have different Bitcoin wallets.
The Different Bitcoin Wallets
According to Investopedia, there are five primary types of Bitcoin wallets you can consider as a Bitcoin investor. They include:
- desktop wallets
- mobile wallets
- hardware wallets
- paper wallets
- online wallets
As a Bitcoin trader, you can choose the wallet or wallets that work for you based on your preference and the aim of your transaction.
Desktop wallets are programs that are installed on your desktop or laptop to give you control of your Bitcoins. Some desktop wallets run on software that is more advanced than others. Such desktop wallets will often include extra features such as the ability to run a full node.
A beginner in this trade might want to look for a simpler wallet to avoid getting confused. Besides, desktop wallets are prone to cyberattacks, giving hackers access to your private keys and assets. To go around this, always ensure that your computer is free of malware and spyware.
Mobile wallets work just like desktop wallets, except that they are directly connected to your mobile phone. That way, you can track the information about your transaction in real-time if you have access to your phone.
They also include mobile features such as QR Code scanning in case you need to make a quick purchase. However, you risk losing access to your currency if your phone gets damaged.
Hardware wallets store your private key on an offline physical device. You can carry hardware wallets around like a flash disk or hard drive. Whenever users need to access their transactions, they simply plug in the device into a computer.
Reviews from Bitcoin investors confirm that the most secure type of wallet is the hardware wallet. The wallets are protected against cyber attacks as well as malware.
Paper wallets are pieces of paper that store your private and public keys. They are not prone to hacker attacks because they exist offline.
Paper wallets were popular at the dawn of Bitcoin. You can create a paper wallet by using a key generator program. The program generates the public and private keys from random numbers along with two scannable QR codes. You then print the information and keep it securely with you.
Online wallets are convenient and easy to use. You can access them from anywhere in the world. They are, however, the least commonly used wallets because they have a reputation of being very easy to hack into.
Online wallets are particularly prone to phishing and third-party compromises. However, you can safeguard your assets by using two-factor authentication alongside strong passwords.
Now that we’ve seen what Bitcoin wallets are, let’s see why it’s essential to have more than one.
Do You Need Multiple Wallets?
While you don’t need more than one Bitcoin wallet, having multiple wallets is an excellent habit. Bitcoin trading and investment are still evolving, hence it would be unwise to put your eggs into one basket. After all, keeping your money in different places doesn’t reduce the amount you invested.
As we continue to learn more about the world of Bitcoin and other cryptocurrencies, these are some of the benefits of having several Bitcoin wallets:
You Protect Yourself From Hackers
Bitcoin wallets are monitored by blockchain, which records and keeps information from various places in the world via multiple devices. This reduces the risk of hackers manipulating the system.
If you have invested quite an amount into Bitcoin but have acquired numerous wallets, it’s hard to attract attention whenever you make a transaction.
You Have Backup
One of the worst things that a Bitcoin investor can do is forget their password. Remember, Bitcoin is a digital currency, and the holder has no name tied to their account. Unique cryptographic information identifies the holder’s blockchain address, but the holder must remember their password to access their currency.
When a Bitcoin investor holds multiple Bitcoin wallets, they have a password for each. If you forget a password to one of your wallets, you still have the chance to access the keys to the Bitcoins kept in another wallet. Unfortunately, an investor with a single wallet cannot enjoy this benefit.
Multiple Wallets Come With Convenience
All Bitcoin wallets do the same thing. But choosing to have more than one wallet will give you a hassle-free experience when making transactions.
Sometimes, all you need is to make a payment to a vendor that accepts Bitcoin. In this case, a mobile wallet would be ideal to use. However, if you trade large amounts of Bitcoin, it is advisable to use an offline hardware wallet.
Bitcoin wallets are keys to your Bitcoins. They help you keep your crypto secure with a password that is unique to only you. So, can you have multiple Bitcoin wallets? Yes, and you are strongly advised to.
On top of this, you can choose from the five types of Bitcoin wallets based on your personal preference and the overall aim of your transaction. These include desktop, mobile, online, and hardware wallets. As you consider which option to go with, remember that some wallets have more significant security risks than others.
- BBC: What is Bitcoin? An eight-step guide to the cryptocurrency
- Bitcoin: Frequently Asked Questions
- Investing.com: Most Surprising Crypto Statistics of 2021
- Investopedia: Introduction to the Bitcoin Wallet
- River Financial: How Bitcoin Wallets Work
- YouTube: Explain Crypto To COMPLETE Beginners: My Guide
- Investopedia: Blockchain Definition