The Bitcoin wallet is a place where the bitcoins can be kept securely and to do any transaction of this cryptocurrency there is a need for two keys. One of these is a public key and the other is the private. While the first one is used by others to transfer bitcoins to someone’s account the private key is used by the owner to transfer the money from his/her account to someone else’s account. For completion of any transaction both the keys are important.
Now there are two different types of bitcoin wallets. First one is where the two keys are stored in digitally in an online wallet, or a hard-drive-based software wallet. The other is the paper wallet where there is a document that contains copies of the public and private keys that make up a wallet along with QR codes which can be scanned and added to a software wallet to make a transaction.
Now let’s discuss in which situation one can lose the bitcoins from the wallet and how to protect it. Well for completing any transaction there is a need for two types of keys and if someone gets hold of a person’s private they can easily withdraw the funds from the account. So the purpose of the wallet is to keep the private key securely. When one saves your coins in an online wallet, or a hard-drive-based software wallet, you are vulnerable to attacks by hackers or malware that can log your keystrokes. It can also be lost if the PC is stolen or the hard-drive crashes.
The other popular options for keeping your bitcoins safe is something called a paper wallet. Here all the digital coins into a physical paper form using just a printer. The advantage of having a paper wallet is that the all important two keys are not stored anywhere digitally and so there is no need to worry about cyber-attacks or hardware failures.