What are Cryptocurrency Wallets?
Where is your cryptocurrency stored?
In a bank? No, there’s no central authority that oversees all transactions.
In a physical location? No, this is digital currency we’re talking about.
Where then? In a wallet.
Just like a physical wallet for your cash, your cryptocurrency can be stored in a wallet. It’s yours alone to access and it comes with stringent security features. Let’s dive into this.
What is it exactly?
You might know that cryptocurrencies use encryption - public and private keys - to authenticate transactions and validate balances. The cryptocurrency wallet is a software program that provides these features, giving you a unique ID through which all your transactions are identified with you and preventing any unauthorized access to your digital money. In order to use bitcoins, Money Trade Coin and other cryptocurrencies, it is necessary to have a cryptocurrency wallet.
You’ve got to remember that these wallets don’t really store money - they store information about all the transactions on the blockchain and your portion of the cryptocurrency on the blockchain.
How does it work?
Each wallet has a private key associated only with it. In order for a transaction to be conducted over the blockchain, your public key must match with the private key on your wallet. The public key denotes how much currency on the blockchain is being transferred to your wallet.
This system keeps your wallet secure and also doubles as a ledger.
Types of wallets
There are multiple kinds of wallets. Money Trade Coin will dissect the several kinds and the specific wallets in a future post. For a broad overview, they can be divided into the following categories:
Hardware
While all others wallets on this list are online-based, hardware wallets allow users to store their currency offline. It usually comes in the form of a USB drive. There is the option of connecting to the web as well. In order to conduct transactions, you simply plug in the device, connect to the web, enter your pin and confirm the transaction.
Mobile
This is a common type of wallet. It is used to conduct transactions in stores and when you plan to send money to another individual. Through a mobile application, your wallet can send and receive currency in practical situations.
Desktop
This one’s pretty self-explanatory. You use desktop wallets on your computer or laptop. They typically have high-security features, though you should be careful about the security of your computer as there are viruses and hacking attempts that go for cryptocurrency wallets.
Online
Online wallets can be used from anywhere, as they operate out of the cloud. However, cloud-based wallet services are vulnerable to hacking attempts, as a third party is in charge of your wallet and private keys are stored online.
There’s a lot more to cryptocurrency wallets, but this should give you some food for thought. Stay tuned for information on how to pick a cryptocurrency wallet and more.
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