If you’re interested in using virtual coins like Bitcoin, Ethereum, Litecoin or any other out the over 1,500 coins and tokens currently available on the market, you’re going to need a wallet. If you are new to cryptos, this guide is your shortcut to understanding what a cryptocurrency wallet is, how they work and which one suits you best.
What is a crypto wallet and how it is different from a normal one
Cryptocurrency wallet or just a wallet is a software program that gives you access to all cryptocurrencies in your possession and allows you to manage your holdings, store, receive and send coins.
Some wallets are designed to hold only one type of coins, while others support multiple coins, which is very handy if you don’t want to limit yourself to a single asset. Some wallets have other features, such as checking live exchange rates to your fiat currency of choice.
Cryptocurrency wallet is fundamentally different from a standard “pocket” wallet as there are no coins there at all. Actually, digital coins are not stored anywhere at all as they don’t physically exist. Instead, we have records of transactions stored on blockchain, and cryptocurrency wallet can interact with and analyze those blockchains to let you perform operations with your assets. It looks more like an Internet banking with a digital key.
Where are my keys?
Every crypto wallet has a public and a private key.
A public key is another crypto misnomer, as it is not a key but a wallet address. It’s like a bank account number that other people use to send coins to your wallet.
A private key is your digital signature and a PIN code to your crypto locket combined. It is used to access the wallet and manage the funds tied to it.
A private key is a string of letters and digits randomly generated and encrypted in the format supported by your wallet. You don’t have to go deep into technical details of how your private key was created, make sure that it is kept in a secret and secure place. Anyone who gets your private key will be able to open your wallet and take your money. Furthermore, if you lose or forget your key, you will lose your money. Forever. No matter what. No key, no money. Bear it in mind and be careful with your keys.
Technically, when someone sends youг Bitcoin or any other type of virtual currency, they assign the ownership of the coins to your wallet address. So the exchange boils down to a record on the blockchain and change of balance in a couple of cryptocurrency wallets. There is no actual exchange of coins as those coins also exist only in a digital form.