The main difference among wallets is the way they manage the private key of their users. Some wallets retain control of the private keys (custodians), while others leave the full control of the private keys to their users.
Custodians: there are many platforms that allow you to manage your funds, performing the same function of a bank where users can deposit funds. Users are provided with an interface to manage their funds but their private keys are stored in the servers of the wallet providers, representing a possible vector of attack
Among these types we count:
-Online wallets, that can take both the form of softwares or websites
Users have control over their private keys: this type of solution provides a higher degree of security, since they do not store the private key of their users on their servers. Therefore, the user has full control over the security of their funds.
Among these types we count:
-Mobile wallets: downloadable software for laptops or other devices.
-Hardware wallets: unlike software wallets, these wallets are small devices, similar to a normal usb key. The private keys are stored inside the device, guaranteeing an ever higher degree of security. Accessing the keys require physical possession of the device, making an attack even more difficult and complex.
The backup is a copy of your private key, that uniquely links a user with a wallet and it is necessary to restore your wallet and access your funds in case of hardware failures. It is represented by a mnemonic phrase of (usually) 24 words. Setting a backup is fundamental for the security of your wallet, as it is the only way to recover your funds in case your wallet will get stolen or lost. The backup can be noted both in physical and digital form. Make sure no one is looking at it while you write it down. In the unfortunate event of someone becoming aware of your backup, he could then access your wallet and empty your funds.
The PIN code is composed by 4 or 5 figures and can be set as an additional security measure for your wallet. It is a unique code, linked to the device where the app is installed. The PIN is necessary to visualize your private key or authorize transactions, in order to protect your funds in case of loss or someone being able to gain control of your device. It is important to note that the wallet provider will never be aware of your PIN.
Each payment carried out on the Bitcoin network is identified through a set of two keys, randomly derived. The private key can be compared to the password of an account: it is used to prove the ownership of the associated address and thus to fulfil the necessary conditions to spend the funds in question. It gives a user full control over his funds and is never to be shared with anyone. Having a backup of the private key is fundamental to recover the funds in case of unexpected events (e.g. hardware failure).
The public key is instead to be compared to an e-mail address or a user name. Unlike the private key, it can be shared. It is also used to derive all the Bitcoin addresses where a user receives transactions.
A Bitcoin wallet is a fundamental tool to be able to use bitcoin. It contains your funds (that can be scattered over many addresses) in the same manner as your traditional wallet contains different banknotes. A wallet controls funds through a set of public and private keys, that allow you to receive payments and be authenticated as the legitimate owner of your funds.