Wallets or le porte-monnaie in French and la cartera in Spanish are an essential part of human civilization, while the name and utility remain the same the form has evolved innovatively. Isn’t? Wallets no longer need a pocket or a handbag; they exist on the digital world with an IP address in electronic form storing money and helping in all form of transactions. Commonly known as Mobile wallet or digital wallet are slowly making their way in an individuals life. Another electronic form of wallet that stores digital currency or cryptocurrency is a crypto wallet and today’s post is to know about this tiny piece of storage that plays a crucial role in cryptocurrency owners and traders.
Let’s get started –
What are Crypto Wallets?
Crypto Wallets are the software programs that store the private and public keys of the transactions happening on a blockchain network. So, for example, you bought 10 BTC from your friend A, now your friend A is basically signing off the ownership of 10 BTC to your wallet’s address. Now for you to access that 10 BTC you would need your private key stored in your wallet to match the public key available on the ledger, when your friend signed off from 10 BTC. Once the two keys match, there is credit that happens, and your account balance is increased. These private keys stored in your wallet are long hexadecimal codes, known only to your wallet and you.
The cryptocurrency wallets can store multiple coins or tokens at once, however most of the wallets available in the market support only a limited number of cryptocurrency.
Why You Need a Cryptocurrency Wallet?
If you are traveling from London to New York, would you be able to transact in GBP? Not necessarily unless you get your GBP exchanged to USD. Similarly digital currency or cryptocurrency is another form of currency that does not have a physical state, i.e., notes, coins etc. that you can keep in your pocket, and so to use it in crypto world you need a crypto wallet that could let you exchange your fiat currency to Ethereum or help you in trading bitcoins over an exchange.
How do Crypto Wallets work?
Crypto wallets never store your money unlike physical wallets or mobile wallets available for your fiat currency. They only store public and private keys that could be termed analogous to your pin number for your debit/credit card or bank accounts. Now let’s take a case when you are withdrawing some money from an ATM, you insert your card and pin, and in fact, the pin provided by you matches the one stored in the bank database transaction is successful, and cash is handed over to you. Similar is the case with a crypto wallet, taking the example of you buying a coffee with your crypto wallet. Say 1 BTC is the value of one cup coffee, you send the Bitcoin, i.e., you are sending the VALUE in the form of transaction or putting simply transferring the ownership of 1BTC to the coffee shop owner. Now, this sign off reflects in your crypto wallet and would decrease the account balance, but for the recipient, he has to match his private keys with the public address to which you sent the Bitcoins to, to get an increase in the balance.
This transfer of ownership of private keys provides individuals with total control over the funds associated with equivalent public keys. Hence it is crucial for each individual to keep your private key safe and secured just like you keep your PIN number safe.
Have you used a crypto wallet? How was the experience? Do share your story with us @getnuo our twitter handle.