The very first Bitcoin wallets were integrated with the distributed systems which talked to each other to attain a consensus on transactions that had taken place. This consensus is known as the "blockchain." Each transaction is recorded in the blockchain, showing whose authority was used to transfer that value in Bitcoins, and which new authority controls them.
Being distributed rather than centrally-controlled, the nodes hear about transactions through the proverbial grapevine and then compare notes, carrying out a predetermined algorithm to be in discrepancies. As more nodes come to a consensus concerning the validity of a transfer, it becomes more indelibly recorded in the blockchain. Because the blockchain contains the entire recorded history of each and every transfer that has been available of each and every Bitcoin that ever existed, it keeps growing, so streamlined wallets have now been designed which store Bitcoin codes, but which are influenced by third-party "full" nodes for verifying and recording transfers. They're ideal for mobile devices with limited resources but aren't limited by such devices. The decision between utilizing a full or a streamlined wallet is the very first of several decisions a dao marketing participant has to face.
Full nodes consume more storage area, and they verify and record transactions for and from the network, which consumes bandwidth and processing power. Allocating these resources to Bitcoin functions reduces the efficiency of some type of computer for other purposes, but it's not without reward. Processing Bitcoin transactions, i.e., "mining," can generate fees for the systems performing that processing, so given an efficient enough computer and a relatively inexpensive source of electricity, it's possible to truly earn again by operating a full node. There's also the added reliability of coming to the exact same tier as the other core systems in the Bitcoin network, rather than being one tier down, influenced by another core system. While I initially believed that the benefits of managing a core system outweighed the expenses, I came to understand that there is competition in the field of mining and that my value-line computer was not going to make me rich by processing transactions. Ultimately, I also didn't desire to allocate its limited resources to managing a core node.
Having come to that particular realization, the following thing I realized was that I will not need my Bitcoins tied to a wallet on my desktop computer. I am talking about, hey, I'm going to want to pay them wherever I am, right? Why not a mobile app for my mobile phone would be a good choice - I'd always contain it with me. This, however, is where another weakness arrived to view. What if I lose or break my mobile phone?
Losing a cell phone with a mobile Bitcoin wallet is nothing like losing a credit card. You can't simply obtain an immediate replacement - in this regard, it's a lot more like losing a wallet high in cash. When someone doesn't return the "wallet," your Bitcoins are gone.
As an interesting aside, there is a hard limit to the number of Bitcoins that may ever enter into existence, so if a wallet is lost - or even if just the password to the wallet is lost - it's easy for the Bitcoins contained therein to become permanently inaccessible. Since such accidents do happen, this means that Bitcoins will actually be more scarce, and thus, will experience long-run increases in purchasing power, unlike fiat currencies which are printed incessantly, and eternally buy less.
Anyway, not wanting to see such loss and attendant disappointment, I needed ways to back up my mobile-based wallet. If I kept a copy on my home computer, it and my mobile phone could both perish in the exact same house fire so I ultimately decided that a Web-based solution was the best option for me. I can access it from my smartphone, from my desktop PC, or from an Internet café wherever on earth I will find myself at any time. I trust a third party to perform a Bitcoin "core" installation, to perform backups, and to give me Web-based access to any number of Bitcoin wallets I will like to create.
A number of the services they supply generate fees for them. In this regard, they're something like a traditional bank account, holding your funds, executing transactions per your instructions, and possessing the capacity to abscond with your cash, but unlike a bank account, there is no FDIC insurance. Consequently, I've decided that this can be a fine solution for storing small balances of Bitcoin, but I've made a mental note to reevaluate the risks should my balances be more significant.
