First step on the ladder to Bitcoin wealth is having somewhere to store it. Without a wallet you cannot join the race. So lets talk about bitcoin wallets and what they are and then explore your options.
Wallets and Cold Storage
In order to own bitcoins, you need to have a virtual wallet in which to store them. When you wish to receive bitcoins (e.g. when you first buy them by exchanging another currency) then your wallet will create a new wallet address, which acts like an email address. You provide this address to your currency exchange, and they use it to send your bitcoins.
Wallets can be stored online in the cloud, or locally on your own computer. Just like a physical wallet, if your digital wallet is lost (and there is no backup) then the currency you had within it is also lost. There are pros and cons for each method.
Cloud Wallet
Some sites, such as CoinBase and CoinJar offer a combined exchange and wallet service, which can save you a lot of time. Cloud-based wallets are marginally more vulnerable to attack by hackers. This is due to them being connected to the internet the whole time, and being well-known organisations (i.e. prime targets). However, most of them are fully aware of this, and employ strict back-up polices to protect from hacking and system failures.
Local Wallet
Storing a wallet on your local computer can protect you from hackers. However, if you still use the computer to connect to the internet, you are still vulnerable to attack. However, you are a much smaller target for hackers to consider. Most desktop wallets require the bitcoin blockchain to be downloaded in order to function, which is a very large download when you initially install the software.
Mobile Wallets
“Mobile wallets where virtual world meets real world”
You install your wallet app on your phone unsurprisingly. However this is where virtual world meets real world. You see most wallets have an inbuilt scanner feature. The idea is if you are in a shop that accepts bitcoins, they typically have a QR code that you simply scan and the bitcoin price is transferred automatically from your wallet to the merchants bitcoin account and voila you just bought something with bitcoin.
Five Markets, a grocery store located on 24th Street in San Francisco, is one of the first establishments to introduce the new POS. This means that Evelyn Fong, co-owner of the store, can charge customers in Bitcoins using Revel’s POS.
Chris Ciabarra, chief technical officer at Revel Systems, says the process is fairly simple. Before they transact, however, both customer and shop owner should open accounts in Coinbase, an online Bitcoin wallet. A QR code is displayed on the screen once Fong selects the Bitcoin option on her POS system. Customers simply scan the QR code displayed on the payment screen using Coinbase and the appropriate amount is deducted from their account. An email confirmation of the transaction is subsequently emailed to both customer and grocery store owner. The entire transaction takes less than a minute and transfers Bitcoins from the customers’ wallet to Fongs’ online Bitcoin wallet at Coinbase. Bitcoin is already accepted in select retail establishments such as the Cup and Cakes bakery in San Francisco These wallets are not exactly full Bitcoin clients. They generally constitute an SPV or simplified payment verification system, downloading a tiny segment of the block chain. Moreover, these mobile clients rely on various trusted nodes available within the Bitcoin network for incorporating the appropriate information. Some instances of mobile wallets are the Kipochi, Mycelium and Blockchain. Kipochi has the innovative feature of allowing people to utilize the phone number as the Bitcoin address.
Cold Storage
“Store your bitcoins on a USB that way your bitcoin really are with you”
This term was created to refer to when you isolate your wallet from any internet connection. You may place it onto a portable hard drive or USB stick, or another computer that is never connected to the internet. This protects your funds from any kind of hacking or viral infection. However, it doesn’t Remember you can download your free wallet and free bitcoin in the members area.
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