Everyone wants to own a bitcoin today due to the returns it has given to its owners. But little do people know how the transactions in the crypto world work. It is a crypto wallet which helps people keep or spend their cryptocurrency, thus giving it the basic functionality it has.
What is a crypto wallet?
Crypto wallet is a program which facilitates storage, sending and receiving of cryptocurrency. So if you want to buy that cryptocurrency which is rocking the market, you have to have a crypto wallet first. You can read the best crypto wallets of 2021.
How do these work?
The physical wallets hold our physical currency notes and thus, we expect our crypto wallets to be a storehouse of our crypto currency. Crypto wallets are a bit different from our regular wallets in that respect. As there is no physical currency which exists, the only proof of transactions and your ownership of the cryptocurrency, is the transactions recorded in the blockchain.
Crypto Wallets have a private key and a public key. Your public key is what you share with the world while only you and your wallet knows your private key. Thus Public key, as its name suggests, is known to the public and thus identifies you on the network. While a private key is more sort of an authentication key only you hold. It is more like your secured PIN which enables you to spend money. When someone sends you money, they send it to your wallet’s address. They give the ownership of that money to your wallet. Your wallet successfully receives the money if the private key you hold matches the public address to which the money was sent.
Crypto wallets have addresses which are akin to having a bank account. Just like those, they are unique and thus there is no overlap. Don’t worry if this all sounds too complicated as you don’t have to do this stuff yourself but is done by the backend tech. For you, it is just like sending an sms.
When someone sends you money, they send it to your wallet’s address. They give the ownership of that money to your wallet. Your wallet successfully receives the money if the private key you hold matches the public address to which the money was sent.
You can use the wallets to store your profits earned from trading. If you want to start trading, you might want to take advantage of free crypto signals.
Types of cryptocurrency wallets
- 1. Desktop Wallets: They are downloaded into your machine and thus can be accessed from there only. It makes them secure for you to use. However, if someone gets hold of that machine, either physically or virtually, your wallet might also get compromised. So, it is as safe as your machine aka computer.
- Mobile Wallets: This wallet is downloaded to your local device as well. It is generally accessed through an application on your phone. Thus you can spend your money directly through your phone by scanning codes.
- Online Wallets: Such wallets are stored on the web. This makes them more accessible as they can be accessed from anywhere around the world, from any machine. From this convenience, arises their security vulnerability. As even your private key is stored online, on a cloud which is hosted and controlled by a third party, it always feels too much risky without a regulating authority. So, they are more threatened by the bad guys looking to steal your money.
- Paper Wallets: It is a very simple and secure way of storing your cryptocurrency. Having a paper wallet, simply means to have a printed copy of both your public and private keys. There is absolutely no chance of a hacker getting into a paper. A software can also generate and print such keys for you and hence can be referred to as a paper wallet as well.
- Hardware wallets: These wallets store the private keys on a hardware device like a CD or a pen-drive. As these are kept offline, this increases their security when compared to web or software wallets. Pen-drive with their plug and play facility are a preferred form of hardware on which such keys are stored.
Wallets are secure and easy to use and a good place to store all your crypto credits.
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