What are Cryptocurrency Wallets and how do they Work?
“Cryptocurrency wallet is a digital wallet that helps you to store, send and receive the cryptocurrencies of your choice and also helps you in proving that the cryptocurrency inside the wallet is yours.”
They are like traditional wallets just Digital
Keeping a traditional wallet in your pocket serves mainly two functions. One, you can store your fiat currency notes in your physical wallet and two, you can prove that the currency in the wallet is yours as the wallet belongs to you. Similarly a cryptocurrency wallet is a digital wallet that helps you to store, send and receive the cryptocurrencies of your choice and also helps you in proving that the cryptocurrency inside the wallet is yours.
Structure of a Crypto Wallet
Every Cryptocurrency wallet has 3 main components
Public Key
The public key can be considered as an email address of your account. If you want to receive mail you need to give your email address to the sender. In a similar way every crypto wallet that is generated has a public key address. To receive cryptocurrency to your wallet you need to provide this public key address (known as wallet address) to the sender.
Private Key
In order to send or to access the components of your wallet you need another key that is top secret and can be considered as the password of your email account. To have access to the components of your crypto wallet you must need your public key (Wallet Address) and Private Key (Secured Password). The Private Key is generated as soon as the wallet is generated and is a set of 12 to 24 random words. The private key must be kept secured at all times at a safe location as if lost, the wallet can never be recovered and the cryptocurrency lying inside will be lost forever.
Storage Space
The storage space of the wallet is the place where the copy of the actual ledger of your cryptocurrency is stored. This helps you provide the information regarding the amount of cryptocurrency token that you have and also has embedded software that helps you to send and receive the cryptocurrency to and from the wallet.
Takeaways
- Cryptocurrency wallets are like traditional wallets, just digital.
- Cryptocurrency wallets help you to store, send and receive the cryptocurrencies.
- There are three major components of a crypto wallet – Public Key, Private Key and a Storage Space.
- To access and use a crypto wallet both public key and the private key are required.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
Photo by – Jonathan Duran on unsplash
