What You Should Know About Crypto Wallets, Public & Private keys

Owning a cryptocurrency is impossible without cryptocurrency wallets.

Today we will talk about what it is and will simultaneously touch on the technical part a little.

What is a Crypto Wallet?

A crypto wallet is a means by which you can store your cryptocurrency, as well as send and receive it.

Since cryptocurrency has no physical embodiment, the wallet is also actually just an “account number” that stores your money after exchanging BTC to USD, ETH to USD, etc. in one or more currencies.

Also, the concept of a crypto wallet cannot be considered without mentioning its two most important components – keys. There are only two of them:

•   A closed (private) key is a kind of “password” that allows you to manage the money stored in the wallet. In the case of bitcoin, the most important and widespread currency, it is a random, unique 256-bit number (a string of letters and numbers) obtained by encryption. It is impossible to find the right symbols using a brute force method.
•   The open (public) key is a conditional address of your wallet, which can be seen and known to any user. It can be compared to a bank card number by which you can transfer or write off funds. The public key is generated on the basis of the private key, while the reverse transformation, into the private key from the public key, is impossible. Moreover, you can generate several public keys on the basis of one private key.

With all the similarities to ordinary bank cards, one should not forget about the main distinction of cryptocurrency: all operations performed in it are irreversible – this is the basis of the blockchain.

Irreversibility is achieved by creating a mathematical digital signature for each transaction based on the private key.

Despite the fact that there is always only one private key, it can be used to generate different signatures by applying cryptographic methods.

Moreover, the public key is likewise used to create the signature.

Speaking in plain terms, the signature confirms both the account from which the user seeks to transfer funds and his “password” to make the transfer.

It is worth recalling another hallmark of cryptocurrency – the anonymity of wallets. And if a bank account with a linked plastic card is almost always opened based on passport data, a crypto wallet is not linked to one person.

Therefore, the one who owns both keys may be considered the rightful owner of all funds on it. This is why the issue of security, or rather, the reliability of storing the private key should be given special attention. This problem is also solved by using a crypto wallet.

Types of Crypto Wallets

The list of the existing types of wallets is very diverse. They include:

•   Online wallets – sites where you can store the private key. They are convenient in that you can access the wallet from any device.
•   Mobile applications – counterparts of mobile banks.
•   Exchanges –  the analogue of classic forex and securities exchanges, focused on cryptocurrency. So you can explore the best places to buy and sell cryptocurrency easily, and use your crypto wallet to transfer or convert funds.
•   Computer programs (software wallets) – countertypes of a mobile application. Sometimes they allow you to work without an Internet connection, for example, when creating addresses.
•   Browser wallets, which are similar to software ones. In contrast, these represent extensions for browsers rather than full-fledged separate programs.
•   Hardware wallets – special devices that are somewhat reminiscent of USB flash drives with buttons and their own software. They can be disconnected from a computer, so they are more reliable in the event of viruses or hackers, but they may be easily lost as well.
•   Paper wallets – as odd as it sounds, both types of keys can be stored on paper as well. This method also has the right to life, since it will be much more difficult for attackers to get to a sheet of paper stored in a desk drawer or even a safe than to a program on a computer connected to the Internet.

In addition, all wallets are divided into two types:

•   “Hot” – with online access.
•   “Cold” – without access to the network. These may be both hardware and software wallets that work offline.

How to create a crypto wallet?

You can choose the most suitable crypto wallet, including the one that allows you to work with a particular currency.

How to create a ‘hot’ wallet?

To create a ‘hot’ crypto wallet, you just need to go to one of numerous specialized sites and register a wallet on it. To create the wallet, you just need to enter an email address and, sometimes, a phone number, as well as come up with a password for access. A similar procedure is applied in mobile applications.

In addition, you may need to download a wallet backup copy upon registration. It may come in handy for re-accession.

How to create a ‘cold’ crypto wallet?

In this case, the procedure is reduced to obtaining a pair of keys, which you can save in any convenient way, even by writing them down in a notebook.

Admittedly, to work with this wallet, notably, to find out the balance, you will still need online services.

You can use one of the many wallet generator sites that allow you to obtain random and unique addresses and print them as alphanumeric strings or QR codes for convenient storage and use.

Conclusion

So hopefully, this article has provided at least some of the most basic information on crypto wallets, private and public keys.