Bitcoin wallets are where Bitcoin users store their digital currencies. These wallets are not leather-bound, everyday carry that hold cash currency and credit cards in your pocket. Instead, Bitcoin wallets are encrypted hardware and / or software that holds private keys that allow users to send and receive digital assets. Below is a list and description of the most popular types of Bitcoin wallets:
Hot (Web) Wallets: Web wallets allow users to send and receive Bitcoin online via a browser or mobile app. In this case, service providers manage the security of each account’s Bitcoin keys. Hot wallets are the most convenient method of storing cryptocurrencies such as Bitcoin. However, hot wallets are also the least secure given the fact that the user does not control or manage their own Bitcoin keys.
Desktop Wallets: Desktop wallets allow users to store Bitcoin and other cryptocurrencies directly on their computers. Desktop wallets require users to store private keys on their hard drive, allowing for users to access cryptocurrency funds from the computer storing the wallet. Though likely more secure than hot wallets, desktop wallets may be unrecoverable if there are no backups if and when a hard drive crashes or is corrupted. Desktop wallets also allow users to store a full version of the Bitcoin blockchain on their hard drives.
Cold (Hardware) Wallets: Cold wallets are hardware products specifically designed to store Bitcoin and other cryptocurrencies offline over a long period of time. They are extremely difficult to compromise compared with a hot wallet as they require a limited amount of software programming to store digital assets. Popular cold wallets include the Ledger Nano and Trezor. One limitation of cold wallets is the cost, with both over $100 USD.