Cryptocurrencies are a hot topic and have been so for quite some time. As such, crypto lingo is constantly floating around public conversation and might alienate someone fairly new to the scene. One term of particular concern is the crypto wallet, as it is important for anyone getting involved in crypto to have one and understand the basics of how these crypto wallets work.
What is a Crypto Wallet?
The first thing anyone finds out about crypto is that it is money with no physical form. So, talking about a wallet for it may seem a bit strange. However, the name crypto wallet is quite accurate. Just like a real wallet, a crypto wallet allows you to access your cryptocurrency when you need it.
In the case of cryptocurrency, these wallets allow you to interact with blockchains and other decentralized distributed systems, which you need to do to access your cryptocurrencies. It’s important to note that the wallet does not store your crypto, but rather allows access to it. Your coins are stored on the blockchain, at a unique address tied to your private key.
How Do Cryptocurrency Wallets Work?
Crypto wallets work by storing two important pieces of information; a public key that allows users to interact with other accounts and a private key that gives users access to their cryptocurrency. Think of the public key as a PO box; you can show it to anyone that has a business sending things there. The public key is the information another user gives when they want to receive crypto from you, and it’s what they see when you send crypto to them. The private key, on the other hand, is more like an actual key.
After things have been sent to your address and inserted through the mail slot on the door, you’ll need a key to the house to access them. That’s the private key. It’s how you prove that you are authorized to access your cryptocurrencies. As you can probably tell, this is top-secret and must be treated as such with no exceptions. Anyone with a private key can access the cryptocurrency. A cryptocurrency wallet stores both keys, making sending and receiving crypto possible. The pairs are randomly generated and are not duplicated, and the private key is never displayed or sent to anyone, no matter the nature of the transaction.
Is There Only One Type of Crypto Wallet?
Because the function of a crypto wallet is so simple, there are several forms available. These range from physical devices with the keys sorted on them, mobile apps, online platforms, and even literal pieces of paper that you can carry around like a banknote. Of course, there are differences, as well as pros and cons to each type. Depending on your needs, such as frequency of use, security needs, how many cryptocurrencies you trade, and more, you’ll be able to find a crypto wallet that works for you.
Bottomline
There’s a lot more to crypto wallets, but these are the basics you need to know to find the right one for you and start storing cryptocurrencies.
