What Are Bitcoin Wallets?
Bitcoin wallets are a digital or physical wallet that stores your bitcoins. It can be an online service, a desktop program, a physical “cold” wallet, or a mobile app. You can use Bitcoin wallets to receive, store, and spend your bitcoins.
As the popularity of the cryptocurrency market continues to grow, so does the need for safe and secure storage solutions.
Bitcoin wallets are the essential method for storing and transacting Bitcoin.
So, what are Bitcoin wallets?
Keep reading for a complete breakdown of how bitcoin wallets work, as well as an overview of the many benefits they provide.
How Do Bitcoin Wallets Work?
Everyone who holds Bitcoin has some form of Bitcoin wallet. Bitcoin wallets do not contain the funds but rather store the “keys” or codes to access the funds. Therefore, in a sense, Bitcoin wallets are more like a keychain than it is like a leather wallet in that they hold the public and private keys needed to access the funds, which are stored on the blockchain.
Bitcoin wallets have a designated address, similar to a bank account number, and users receive transfers to that digital address. The balance attributed to each and every wallet address is recorded on the blockchain.
As transactions are completed, Bitcoin miners add new blocks to the digital ledger and each transaction is permanently stored as a digital ledger entry attributing the transaction to the corresponding Bitcoin wallet address.
Private and Public Keys
There are both public and private keys associated with Bitcoin wallets. The private keys are used to send Bitcoin and are secret (sort of like password), while the public keys are used to identify the wallet on the public ledger. When you want to receive Bitcoin, you share the public keys with the sender.
Together the keys are your personal identification. They allow you to prove ownership of transactions on the blockchain.
There are two basic types of Bitcoin wallets:
- Hot wallets is the name given to a wallet hosted online with a third party, such as a crypto exchange. (Here, we have also referred to hot wallets as “e-wallets.”)
- Cold wallets refer to wallets that are stored offline on your PC, mobile, or a hardware device similar to a USB. They can also be simple paper wallets (keys written down on paper.)
How To Create Bitcoin Wallets
An e-wallet, more commonly called a “hot” wallet, is hosted online, most commonly on an exchange. For the user, it is just like an online bank account with an interface that is relatively easy to navigate.
Many Bitcoin wallets also have mobile apps, so you can access your Bitcoin anywhere.
Creating Bitcoin wallets will involve signing up on an exchange that is typically accessed via an internet browser. Any registered exchange will require at the very least an email address and often personal information to meet Know Your Customer (KYC) identification requirements, such as a copy of an ID, address, and phone number.
Different providers will have their own requirements for signup and will also have different security measures.
- All will require creating a username and password.
- Most require 2FA to log in.
- Some require downloading software in order to access the dashboard.
What Are the Benefits of Using “Hot” or “Cold” Bitcoin Wallets?
Using a hot wallet (AKA, e-wallet) means that you can access your coins anywhere via an internet browser or mobile device. While arguably less secure than a cold wallet, hot wallets are more common and easier to access and perform transactions.
A hardware (cold) wallet will require a USB-style stick and will only be accessible via a desktop PC or laptop connected to the device. A true cold wallet is never connected to a device that is on the internet, which means lower risk of malware, spyware, and SIM swaps. It is most suitable for holding large amounts of cryptocurrency.
To transact from a cold wallet, you need to first connect the device to a computer then move the funds over the network. A hot wallet requires simply logging in online, which makes it the more popular choice for sending and receiving smaller amounts of cryptocurrency.
How Do Bitcoin Transactions Work?
Bitcoin wallets can be used to store, send, and receive coins in the same way that you would use your fiat currencies.
Bitcoin is accepted as a payment option in a growing list of online and physical stores. For example, the country of El Salvador added Bitcoin as a legal tender in June 2021 and is used more widely than in other nations.
The cryptocurrency ecosystem also provides access to decentralized finance (DeFi) products and that can give users access to loans and interest-rate-yielding investment like traditional banking.
Are There Fees Associated with Bitcoin Transactions?
Yes, there are fees for sending and receiving Bitcoin through Bitcoin wallets and through third-party exchanges.
There are also in-app trading fees for the exchange of cryptocurrencies.
Fees will differ depending on the exchange you are using, the volume of funds, the current exchange rates, the availability of miners to facilitate a transaction, and several other factors. In most cases, users can lock in a rate prior to finalizing the transaction.
Frequently asked questions
What is a multi-currency account/virtual IBAN?
A Payset multi-currency account allows you to receive money in 34 different currencies and send money in up to 38 currencies, all within the same account.
You can deposit and withdraw funds, convert currencies at competitive exchange rates, and hold your chosen currencies to capitalize on market movements.
A Payset multi-currency account allows startups and business owners to receive payments from clients virtually anywhere in the world and pay suppliers, staff, and contractors quickly and affordably in their chosen currency.
- Funds can be deposited and withdrawn from the account for a small fee.
- Account holders can send and receive money with other Payset users for free.
- Depending on your region, you can use various payment networks from your Payset account, including SWIFT, SEPA, ACH, Fedwire, Faster Payments, BACS, and CHAPS.
- Once you register an account, you will be provided with a Virtual IBAN (International Bank Account Number), which makes all of these transfers easy.
- We provide you with local payments and collections. For example, transactions in USD, EUR, CAD, and GBP are processed through the local payment networks, which is far cheaper and takes minutes as opposed to days
Are there limits on the amount of money I can send and receive?
No, there are no transaction limits on Payset multi-currency accounts.
However, higher-volume transactions may require additional anti-fraud verification. If you plan to make a large transaction, contact us in advance to avoid verification delays.
How is Payset regulated?
Payset is regulated as an authorized Electronic Money Institution by the UK Financial Conduct Authority. Our activities are also regulated by the Payment Services Regulation 2017 and the Electronic Money Regulation 2011 (SI 2011/99).
How do I add money to my account?
How do I send money from my account?
Once you have opened your verified IBAN account and added money to a balance, transferring funds is simple.
Simply log in into your account and add a beneficiary, then simply “make a transfer” in your preferred currency to that beneficiary.
Types of Multi-Currency Accounts
Information contained in this publication is provided for general education and information purposes only and should not be construed as legal, tax, investment or other professional advice or recommendation, or an offer of, or solicitation for, any transactions or any other actions (or refraining therefrom); This material has been prepared without taking into account any particular recipient’s financial objectives or situation. We make no warranty, guarantee or representation, whether express or implied, as to the completeness or accuracy of the information contained herein or fitness thereof for a particular purpose; Use of images and symbols is made for illustrative purposes only and does not constitute a recommendation or advice to take or refraining from any action; Use of brand logos does not necessarily imply a contractual relationship between us and the entities owning the logos, nor does it represent an endorsement of any such entity by Pay Set Limited, or vice versa; Market information is made available to you only as a service, and we do not endorse or approve it; Any reference to past performance, predicted returns, or likelihood performance scenarios may not reflect actual future performance and certainly do not guarantee future outcomes.
