The role of a cryptocurrency wallet is one of the first and most important things you need to learn in the cryptocurrency world. The cryptocurrency wallets follow the same principle as the standard wallet – purse or piggy bank. The same way you don’t walk holding cash in your hand is the same way with cryptocurrencies. It is clever to store your cash where it is safe, and the same applies to cryptocurrencies.
The cryptocurrency wallet
A cryptocurrency wallet is a program that store the public and private keys and also interacts with multiple blockchains to allows users to send and receive digital currency as well as monitor their balances. If you want to use any cryptocurrency, you need a digital wallet or a cryptocurrency wallet.
How do cryptocurrency wallets work?
A lot of people use cryptocurrency wallets, but not everyone knows how they work. Most people make the mistake of comparing the crypto wallet and the traditional pocket wallet. The digital wallets never store currency. The cryptoassets are not stored in a single location or exist in physical form. What exists is a record of transactions stored on a distributed ledger known as the blockchain.
When a person sends you crypto assets they sign off ownership of the coins to your wallet’s address. To spend the cryptocurrencies or unlock the funds, the private key stored in the wallet must match the public address assigned to the cryptocurrency. If the private and public keys match, your balance increases while the sender’s balance decreases. No actual exchange of the coins happens. The transactions are signified by a transaction record on the blockchain and the change in balance in your crypto wallet.
Cryptocurrencies and security
The pertinent question when it comes to any online business is security; hence the question, are cryptocurrency wallets secure? The security of the wallets varies and mostly depends on the type of wallet (mobile, online, desktop, hardware, paper) and your service provider.
Online wallets expose users to possible vulnerabilities in the platform which can be exploited by hackers to try and steal your funds. On the other hand, offline wallets can’t be hacked because they are not connected to any online network and they also don’t rely on any third party for security.
Are cryptocurrency wallets that important?
Yes! Without them, cryptocurrencies would be just another idea dead on arrival because they enable users to adopt the digital currencies.