The Lowdown On Bitcoin Wallets
There is no need for you to confine yourself to one type of wallet. In fact, we strongly recommend that you have more than one.
If a thief or a hacker accesses your Bitcoin wallet then they can transfer all of your currency into their accounts. And remember that blockchain creates immutable records that you can’t change so there is no chance of you getting your Bitcoins back if this happens. So let’s take a look at the different types of wallets.
If you use a cryptocurrency exchange to buy and sell Bitcoins as most people do they will provide you with an online wallet to store your Bitcoins in. These are very convenient as all you need to do is connect to the Internet and you can use your online wallet to perform transactions.
A mobile wallet is an online wallet for mobile devices. Online wallets are “hot wallets” which means you can call them into action immediately for your Bitcoin transactions. You can access your online wallet with an Internet connection from anywhere in the world. The problem is so can thieves and hackers.
The other issue with online wallets provided by cryptocurrency exchanges is that the exchange can block your access to your wallet if you have your account suspended for some reason. If they close your account for good then you will lose everything.
A desktop wallet is a software application that you download to your laptop or desktop. It is a medium-security wallet. If you disconnect your computer from the Internet then there is no way that a hacker can access your desktop wallet. But as soon as you connect again you are somewhat vulnerable.
It is a lot more difficult for a hacker to access your desktop wallet than it is an online wallet. But it is possible. If your computer becomes inoperable and you haven’t made a backup copy of your desktop wallet then you will lose everything.
In this scenario, your Bitcoin wallet is a piece of paper with all of your private key information on it. You might think that the idea of using pieces of paper to store your Bitcoin information doesn’t really match up with modern technology but actually it is a very safe way to store your Bitcoins.
There are no recorded cases of cybercriminals hacking pieces of paper and nor are there likely to be. The biggest issue with paper wallets is where to keep the paper so that nobody else can find it. If you have a lot of Bitcoins then consider a safety deposit box.
A hardware wallet is the most expensive option and is usually a USB stick that you can carry around with you wherever you go.
These are the most secure Bitcoin wallets out there and if you are going to be a serious investor then we highly recommend that you get one.
All you need to do is to plug the hardware wallet into your computer when you want to make a Bitcoin transaction.
When you complete the transaction remove the hardware wallet and keep it in a safe place.
Is It Worth Getting Involved With Bitcoin Mining?
Bitcoin mining is essential to keep the Bitcoin network going. The miners verify and confirm all of the Bitcoin transactions and without them the whole thing would grind to a halt. There would be no more transactions and no new Bitcoins created.
What is Bitcoin Mining?
Bitcoin miners use very powerful computer equipment to update the Bitcoin decentralized ledger. They need to solve very complex cryptographic challenges and the first to do this will update a block and receive a reward in Bitcoins (at the time of writing this is around 12 Bitcoins).
With Bitcoins being worth thousands of dollars these days this seems like a really good idea. But is it really? You cannot perform Bitcoin mining successfully with a powerful desktop computer. You need to invest a ton of money into very high-end computing power and then pay for the running costs of these computers.
The Process of Bitcoin Mining
Anyone can get involved in Bitcoin mining. There are already thousands of Bitcoin miners that update the Bitcoin blockchain ledger and thousands more want to get involved. With Bitcoin mining, you need to guess a number that will solve an equation that the blockchain generates.
You need to use powerful computers to make these guesses. When you have a lot of computing power you can make many guesses per second which increases your chances of being the first to get it right.
When you guess right the mining software on your computers works out which of the current pending transactions need grouping together in the next block for adding to the blockchain. After this, the entire Bitcoin network validates the transaction.
Bitcoin Mining is difficult
The inventor of Bitcoin and blockchain, Satoshi Nakatomo, created rules for mining where the more mining power in the network the more difficult it is to guess the right random number. As more and more people are becoming Bitcoin miners the difficulty level continues to rise.
The reason behind this increasing difficulty is to create a regular flow of Bitcoins. In reality, this means that it takes around 10 minutes to create a new transaction block on average. The actual times vary considerably. It is all about mining power these days and the more you have the more likely you are to succeed.
Bitcoin Mining Pools
To get involved in Bitcoin mining these days is beyond most individuals. The costs of the equipment required and the running costs are just too much. There is increased competition as well with many miners collaborating together.
One solution to this problem is the Bitcoin mining pool. This is a simple concept where groups of people create a pool and combine their mining power and share the rewards. Even small players can get involved with Bitcoin mining in a pool.
There are a number of large Bitcoin mining pools existing today. They will take a percentage of any success that you have. Usually this is around the 2% mark.
So is Bitcoin Mining worth it?
If you are a newcomer then the answer to this is probably not. There are a lot of factors to consider if you really want to get involved in Bitcoin mining. If you want to go it alone then you will have to invest a ton of money into computers that can make very high numbers of guesses every second.
Then you have to keep these supercomputers running which usually means storage costs (they need proper cooling as they run all of the time) and electricity costs. In truth, you would be better off using the money that you would need to invest to purchase Bitcoins.