Definition/Example of a Cryptocurrency Wallet
A cryptocurrency wallet is the digital equivalent of the regular wallet you carry in your pocket. Instead of holding dollars and credit cards, a cryptocurrency wallet stores the information needed to access digital assets like Bitcoin, Ethereum, Dogecoin, or another type of cryptocurrency.
How Cryptocurrency Wallets Work
Imagine you want to buy some Ethereum. You can use a major cryptocurrency exchange like Binance or Coinbase, and your wallet can be independent or hosted by the exchange. Here’s a look at how a cryptocurrency wallet is used in the process:
- The transaction involving cryptocurrencies, including information about the sending and receiving wallets, is sent to the network.
- The transaction is processed, resulting in the blockchain network recording that one wallet sent a specified amount of cryptocurrency to another wallet.
- The transaction is confirmed by multiple parties in the blockchain network and added to the blockchain. The balances of the sending and receiving wallets should be updated automatically.
Types of Cryptocurrency Wallets
There are three types of cryptocurrency wallets you can choose from:
Software:
Software cryptocurrency wallets are usually free and available via computer, phone, or browser extension. The online availability of software wallets makes them the most convenient but also exposes them to hacking. Examples of software wallets include MetaMask and Coinbase Wallet.
Hardware:
A cryptocurrency wallet can be a physical device that stores your public and private wallet data using Bitcoin technology to keep the keys offline via your computer, usually by connecting to the computer via Bluetooth. Examples of hardware wallets include those provided by Ledger, Trezor, and Keystone.
Paper:
Paper wallets are pieces of paper, either printed or written by hand, containing your wallet address and private key. Using large amounts of paper to store your wallet information may not be practical in terms of availability. Creating a paper wallet requires generating your wallet address and private key through digital encryption. Then, you can print this information using a local printer or write it down manually on paper.
Source: https://www.thebalancemoney.com/what-is-a-cryptocurrency-wallet-5216017
Leave a Reply