Updated: Feb 8
Coinbase.com gives us the simplest explanation. “Similar to a traditional wallet you may carry in your pocket, a bitcoin wallet is used to store money. The difference is that instead of storing a collection of bills and cards, a bitcoin wallet stores a collection of cryptocurrency private keys. Typically, a wallet is encrypted with a password or otherwise protected from unauthorized access."
Different but Speak Same Language
There are many different bitcoin wallets to choose from, each providing different features. However, all cryptocurrency wallets must conform to the established cryptocurrency protocol so they can all be used to send and receive funds regardless of their specific implementation. This is similar to email where you have many choices of email providers but they all ‘speak the same language and can send messages to each other.
Wallet Types Include:
Brain Wallets: A cryptocurrency wallet that is generated from a passphrase. While it may be appealing to store bitcoins entirely within your memory, Caution...challenge is using a sufficiently secure passphrase…and what if you forget it?
Paper Wallets: A way to embody bitcoins in a physical medium such as paper or metal. Like a printed banknote, Caution..if a paper wallet is lost or destroyed, then the bitcoin stored on it is gone forever.
Web Wallets: Web wallets allow you to send, receive, and store bitcoin all through your web browser. They are typically hosted by a provider that manages the security of the private keys associated with your account, although some types of web wallets provide ways for you to remain in control of your private keys. Web wallets are generally more convenient than other types of wallets since you don't have to worry about accidentally deleting a wallet from your computer (and losing your coins). Caution..you do relinquish some control since web wallets usually manage private keys on your behalf.
Desktop Wallets: It's also possible to install wallet software directly on your computer. This allows an individual to have full control (and responsibility) over their wallet. Caution..If the wallet file were to become corrupted with no backup available, the bitcoins stored in that wallet would be lost forever.
Mobile Wallets: Usually offered by online Crypto Exchanges. Mobile wallets are simply bitcoin wallets designed for a mobile device. This means they can easily scan QR codes, are easy to navigate with a touch screen, and are accessible while on the move. Mobile wallets for iOS and Android allows you to access your online crypto exchange account to send, receive, buy, and sell bitcoin. Mobile wallets are almost always ‘light’ clients in that they do not store a full copy of the blockchain.
Light and Full Clients: “Wait a minute…,” you say. “What is a light client?” Full nodes host a full copy of the blockchain while Light clients provide only bitcoin storage capabilities while depending on an external source to read the blockchain. Desktop wallets can be either Full nodes or Light Clients. Again, mobile wallets are almost always ‘light’ clients.
Hardware Wallet: A hardware wallet is a specialized type of device designed specifically to store bitcoins. The advantage is that hardware wallets are much more difficult for a malicious user to compromise when compared to a desktop or mobile wallet since they use the bare minimum amount of software required to safely store bitcoins.
Your Choice...Be Careful
Your preference, your choice. You might want to give this more thought than you give planning your vacation.
Resource and Reference
Coinbase.com: 'What is a Bitcoin wallet?'