What’s a crypto wallet (and how does it manage digital currency)?


A cryptocurrency wallet is a piece of software that keeps track of the secret keys used to digitally sign cryptocurrency transactions for distributed ledgers. Because those keys are the only way to prove ownership of digital assets – and to execute transactions that transfer them or change them in some way – they are a critical piece of the cryptocurrency ecosystem.

Better known as “crypto wallets,” they are like the keys to the blockchain car. Without those keys, the car won’t run. And without them, there would be no way to prove ownership of a digital asset – anything from a bitcoin to a token representing some kind of asset.

What a crypto wallet does

Not only does a crypto wallet (or more generically, a digital wallet) keep track of encryption keys used to digitally sign transactions, it also stores the address on a blockchain where a particular asset resides. If the owner loses that address, they essentially lose control over their digital money or other asset, according to David Huseby, security maven for the Linux Foundation’s Hyperledger Project

Coinbase's crypto wallet UICoinbase

Coinbase’s crypto wallet user interface.

There are two main types of crypto wallets: hardware and software (also known as cold and hot storage wallets, respectively). Hot storage wallets are accessible via an internet service such as Coinbase, one of the largest cryptocurrency exchanges that supplies online wallets for users, and can be further segregated into online wallets and  client-side wallets managed locally on a user’s computer or mobile device.

There are also paper wallet generators, which create keys that can be printed out or rendered as QR codes.

Cold storage wallets are downloaded and reside offline on a piece of hardware such as a USB drive or a smartphone. Exodus.io and Dash QT are two examples of cold storage wallet software. Cold storage wallets can also be purchased as devices with the software already installed on them; these kinds of devices are sold by vendors such as Trezor and Ledger.



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here