Speaking in simple terms, a crypto wallet is a software program which enables blockchain based digital currency transactions and balance monitoring by storing public and private keys. Users willing to use Bitcoins and other Cryptocurrency transactions need to have a digital wallet.
A Detailed Guide To A Crypto Wallet
How the crypto wallet works?
There are millions of cryptocurrency wallet users, but there is a clear lack of understanding about the fundamentals of the crypto wallets. Readers should understand that there is a fundamental difference between the modes of functioning of conventional wallets. The crypto wallets do not store money. Moreover, the crypto currencies do not get stored in a foxed location. Transactions and records of the financial transactions are the only tangible assets in a crypto currency wallet.
The given cryptocurrency wallet stores the public and private keys and collaborates with other blockchain users to monitor their balance, transfer money and conduct other financial transactions. When the wallet user wants to accept bitcoins or any other form of cryptocurrency, he is actually taking a transfer of ownership of the coins from one address to another. For the user to enjoy using the wallet money, the private keys stored in the wallet should match the public address of the attached currency. Once the public and private keys match, the balance amount of the wallet increases depending on the amount approved by the currency sender. At this point, the reader would finally understand it clearly how the transfer of coins take place without the involvement of any physical location. Once the transaction goes through, it is recorded in the blockchain.
Read More: What are Cold Wallets?
Types of Cryptocurrency Wallets:
The different types of cryptocurrency wallets are:
- Desktop: These wallets are downloaded to be installed on a PC or laptop. These desktop wallets offer a comprehensive security framework with the wallet offering accessibility only from the computer where it has been downloaded. However, care has to be taken to ensure that the computer’s access is not shared with unauthorized parties.
- Online: The online wallets run on cloud platforms and are location and device agnostic. They provide convenience of access and are controlled by a third party. The architecture of online wallets makes them vulnerable to external attacks.
- Mobile: The mobile wallet is a part of your mobile phone and thus travels with you physically. These wallets can also be used in retail stores. They have a very simple architecture when compared with desktop wallets considering the limited amount of space which they occupy in a mobile phone.
How Hardware Wallets work
The hardware wallets store the private keys in a hardware device like a pen drive. These devices offer a second layer of security cover and are much secured from external attacks.
The Crypto Wallets are unique in the way they operate. Without actually storing the currency denominations, it is actually creating a value chain ensuring the safe transfer of crypto assets