ℹ️About wallets

A cryptocurrency wallet is a software program that can be used to store, send, and receive cryptocurrencies from a digital address. The wallet is a required component of the cryptocurrency ecosystem, which allows a user to interact with blockchains, make purchases and transactions with cryptocurrency, and monitor balances. It functions in a similar way to a traditional wallet, but holds proof of cryptocurrency.

How do Blockchain Wallets Work?

The blockchain wallet stores the private keys and public keys for a transaction. The wallet enables users to sell, and purchase goods using cryptocurrencies. Let’s understand how a blockchain wallet actually works and what are private and public keys in a blockchain wallet.

• When a blockchain wallet is created, a public key is generated, and one can share that public key with anyone in order to receive funds.

• Private keys as the name suggest is a secret key that cannot be shared with anyone.

• Public keys on the other hand can be shared with anyone.

• They have a relationship similar to a lock and a key. Where a lock can be opened with a correct matching key only, similarly in a transaction if a public key matches the private key only then the users can see the value of their assets.

• No matter how many people have a public key but it will only be useful when it is paired with the right private key.

Types of Blockchain Wallets

• Hot Storage: Hot storage refers to the type of storage that is connected to the Internet. Hot storage, being connected to the Internet, allows the user easy and quick access to funds. It is helpful in daily transactions. But, it also has some disadvantages. It is more vulnerable to hacking and cybercrime. If the private key is lost then there is no longer access to coins. Also, if the private key is stolen by someone then it causes to loss of coins. The different types of hot storage wallets are Online, Desktop, and Mobile wallets.

• Cold Storage: Cold storage refers to the type of storage that is not connected to the Internet. It is also known as offline storage. Cold storage provides a higher level of security than hot storage. It is useful for long-term storage, unlike hot wallets. However, a higher level of security is provided at the cost of convenience. It is not ideal for daily transactions. Although it is secure, it is vulnerable to external damage and loss. The different types of cold storage wallets are hardware wallets and paper wallets.