It has been compared to a Ponzi scheme and called a bubble waiting to be burst by a few. The Indian government has not recognized Bitcoin or other cryptocurrencies and is yet to build a framework on them. Despite warnings from the RBI and finance ministry, Indians have been increasingly investing in Bitcoins.
What is a bitcoin wallet?
You store physical money in a tangible wallet to spend the money later. Similarly, since bitcoin is the digital equivalent of money, you can call a bitcoin wallet as the digital wallet to store your bitcoins for later use. A wallet is the first requirement for using a bitcoin.
Technically you cannot store bitcoins, so you can say that a bitcoin wallet is a software that has a collection of private keys (unique secret codes) that you can manage with the use of the software. You can make transactions with it, and it shows you your available balance.
What is a private key in bitcoin?
It is a secret 256-bit number that is used to spend bitcoins. These keys are saved in a file within your wallet, and they are mathematically related to addresses that are generated for the wallet. It is the ticket or pass that allows you to spend the bitcoin and therefore should be kept secure.
You do not need the private key to see the balance. It is only required to spend it. Bitcoins of a particular bitcoin address can be spent by anyone who knows the private key associated with it.
Bitcoins can only be spent once because the address is again a unique secret code that is ideally used only once. So, the private key becomes useless once spent.
Types of Bitcoin Wallets
There are two types - Hardware wallets and Hot wallets.
Hardware wallets are physical storage devices like your pen drive. These are solely made to store bitcoins and are very secure. You have to connect this device to your computer, phone or tablet to be able to spend the bitcoins.
Popular Bitcoin hardware wallets are Ledger Nano S, KeepKey and Trezor.
Hot wallets are digital wallets that run on internet connected devices. Unlike hardware wallets, you cannot access your bitcoins offline using it.
A hardware wallet is a good choice if you have a significant amount of bitcoins because it cannot be hacked. These are expensive. They are also highly secure as hacking will not be possible due to offline storage.
Hot wallets are to be considered to go shopping with. You can store some of your bitcoins in them for easy spending and convenience. These wallets are free. Bitcoin Wallet, Unocoin, Zebpay, breadwallet and Airbitz are some of the popular hot wallets.
Where and how can you use bitcoin wallet in India?
There are quite a few businesses in India that accept payments in bitcoins. These include bookshops, retail outlets, coffee shops, and restaurants.
To make payments in bitcoins download and register yourself to one of the hot wallet options. Then convert the amount to be paid from INR to bitcoin and send it to the unique wallet address that the service provider should share with you.
In case you want to buy bitcoins, you need to place a bid at the lowest possible price. A sell order that reaches the desired price cap gets pulled into the order book, and the transaction gets executed.
You can consider the wallet's trade history as your ledger. All your transactions get recorded in it.
Also Read: How To Buy Bitcoins In India?