If you one of the millions of people trying to understand the new Bitcoin phenomenon, you've probably run across the term "Bitcoin wallet." And while it makes sense that you would need a way to store a digital currency, you've obviously realized that a wallet for a digital currency must be different than a traditional leather wallet for storing cash. This Bitcoin 101 will attempt to explain the concept of a Bitcoin wallet, and how it can help you securely use this digital currency.
There are many different forms of Bitcoin wallets. The most common kind of wallet is a digital one. These function similarly to an online banking website or service like PayPal or Google Wallet. With a digital wallet, you store coins in a user account accessible only by you. You can pay with Bitcoin directly from a digital wallet, which is useful for making both online transfers and making real-world purchases, though few stores accept Bitcoin.
Digital wallets are available online or as a mobile or desktop application. Mobile wallets are particularly convenient, because you can use Near-Field Communication or scan a QR code to make payments. Software wallets provide a little more reliability by storing your money on your computer. Online wallets offer the convenience of being accessed from anywhere, but have the disadvantage of being more hackable. If someone is able to guess your password, then they can get into your account. Some software wallets don't require Internet access after you put money into them, so someone would have to gain physical access to your computer to steal these.
There are a couple kinds of physical wallets. While these are less popular and more difficult to pay with, they are can be more secure and are great for long-term storage. You can use a paper wallet, where you actually print a piece of paper with the code to access your coins on it. Rather than the actual string of numbers and letters, however, you can print a QR code that can be easily scanned with your phone. You can then store this paper wallet anywhere, and your money is as safe as your wallet. If you're putting this in a safe then it will be incredibly secure, but it you're carrying it around and you lose things frequently, than this may not be a very good way to protect your money.
If you don't like the idea of having a physical copy of your money that can be stolen, they you may be interested in a "brain wallet," where your money is protected by a secret passphrase that you memorize and remember. As long as you're able to remember the passphrase, your money is completely secure, though you have to use a very long phrase to provide enough security. This phrase is much longer than a typical password. Many websites offer wallet software, as well as information about how to use it, often in the form of a Bitcoin FAQ or Bitcoin 101. They are a great source for more wallet information.
