What Is a Blockchain Wallet?
A blockchain wallet, also known as a cryptocurrency wallet, is a software that allows you to store and receive cryptocurrencies. The wallet does that by saving the public and private keys that enable you to interact with other users in the blockchain network. Since you can store, receive, and send money using your blockchain wallet, you can also monitor how much crypto you have.
How Does the Wallet Work?
Each blockchain wallet is assigned a different address, which functions similarly to a bank account number. You can give your wallet address to other users so they can send you payments or funds, just as you can with your bank account number.
Wallet addresses are combinations of numbers and letters. Every combination is unique, so you don’t need to worry about people gaining access to or stealing your funds. There’s no limit to the number of wallet addresses you create, and the owner of each wallet remains anonymous.
Each wallet address has its own private and public key. The private key gives the user access to the funds that are associated with the wallet address. As the name implies, the private key acts like a password to the account. The public key, on the other hand, is mathematically linked to your crypto wallet as a hashed version. A hashed version is a sequence of random letters and numbers which can be used to encrypt a new set of letters and numbers. The first sequence is the input while the second is called output. This process provides an additional layer of security.
Different Types of Blockchain Wallet
Just as there are different kinds of wallets in the real world, there are various kinds of blockchain wallets. Each of them has different features, advantages, and disadvantages.
As the name suggests, this type of wallet is downloaded to a computer and can only be accessed from that specific device. This feature makes desktop wallets one of the most secure crypto wallets. The only downside is that if your computer is hacked or infected with a virus, you may lose all your funds.
An online wallet, or web wallet, is the most convenient wallet, especially for sending funds to another person. However, online wallets also have the lowest level of security, because your coins are stored in a central server, which is vulnerable to hacking by someone with the technical know-how. If that happens, your funds can be easily accessed. For this reason, it is advisable to keep only a small amount of cryptocurrency in your web wallet.
This functions similarly to the desktop wallet, but instead of a computer, you access it using your phone or tablet. The wallet comes as a downloadable app which allows you to use your crypto to purchase things in a physical store through a QR code.
This wallet has a high level of security, while also being convenient to use. Although the term refers to a physical copy of your private and public keys, it also refers to the software used to generate the keys and print them on paper.
This wallet is not connected to any server, and to access it you need the paper. If you need to send some coins to someone, all you need to do is enter the keys into a web wallet or software, or you can scan the QR code that you have printed.
Distinguished from the above software wallets, hardware wallets are represented by hardware devices, such as a USB stick, where users can store their crypto funds. Although you can use hardware wallets in online transactions, they are stored offline, which means no one can hack or access them. One of the advantages of a hardware wallet is its compatibility with several web interfaces. It can also store a variety of cryptocurrencies. When users want to send funds, all they need to do is plug the hardware, send, and confirm the transaction.