A cryptocurrency wallet is a tool that lets users interact with blockchain networks. They are necessary when you need to send and receive cryptocurrencies like Bitcoin, Rimo and other digital currencies. Crypto wallets can also be used to generate new blockchain addresses.
Compared to the regular wallets we use daily, cryptocurrency wallets do not actually store your fund, instead, your coins/tokens are stored on the blockchain as a part of it’s system as a piece of data and the wallets are used to gain access them.
Since most wallets are able to generate new wallet addresses, it’s important to note that the major components which are generated along with the new wallets are “PRIVATE KEYS” & “PUBLIC KEYS”.
Public Key: is used to generate the wallet addresses used to receive payments…… think of it like your account number, you can share it publicly to receive payments.
Private Key: (critical piece of information used to authorise outgoing transactions on the blockchain network) are used to sign cryptographic signatures that are used to generate a unique Hash that can be used to verify transactions.
You can also think of this (Private Key) like the unique 4 pin code used to facilitate banking transactions, without it no transaction can be processed because it is assigned to only you, thus, it should be kept confidential and not shared to/with anyone.
in summary, you can share your public keys to the public domain but not your private keys, because anyone that has access to it can spend your money/ crypto assets.
TYPES OF WALLETS
There are 3 main groups of crypto based wallets namely;
- Software wallets
- Hardware wallets
- Paper wallets
In general terms there are two categories of wallets in terms of their functions, which are Cold and Hot wallets.
Cold wallets: these are the ones that can generate wallet addresses without any form of internet connection and that makes it highly secure against cyber attacks
Hot wallets: these are wallets that are somewhat connected to the internet and are more likely to be affected by cyber/ hacking attacks even though they are used to store your assets.
Note: NEVER SHARE YOUR PRIVATE KEYS WITH ANYONE!!!
A hardware wallet is a cryptocurrency wallet which stores the user’s private keys (critical piece of information used to authorise outgoing transactions on the blockchain network) in a secure hardware device. They consist of physical devices that generate and store keys without any connection to the Internet and as a result are less likely to be attacked by hackers.
Software wallets are applications you install on your computer or smartphone. They store your Private keys (critical piece of information used to authorize outgoing transactions on the blockchain network) on your local device or a flash drive.
A paper wallet is an offline mechanism for storing your digital assets like Bitcoin and Rimo.
it is made up of a piece of paper with a blockchain address (PUBLIC KEY) and its corresponding private key. They can be stored as either a long string of text or in form of a QR code which allows you scan them to carry out transactions.