Introduction

What is a cryptocurrency wallet?

Anyone wanting to buy, use or sell cryptocurrency needs a means of storing it, which is where the all-important wallet is applied. A cryptocurrency wallet is a software program enabling users to send, receive and monitor their cryptocurrency balance, providing a place from where funds are accessed, and all transactions are made.

A cryptocurrency wallet is like a regular bank account in that it is designed to offer users access to a network of fellow traders while keeping an up-to-date balance following transactions. A cryptocurrency wallet is also very different to a regular bank account because it never actually holds any type of cryptocurrency.

Cryptocurrency is immaterial, even in the digital world.
When users trade cryptocurrency, they are trading ownership, which is recorded on a ledger, or the blockchain.

Instead of cryptocurrency, each wallet functions to create, store and use its own unique private key, to make transfers, receive cryptocurrency and monitor an ownership balance.
This means that a private key acts as a password to a cryptocurrency wallet, but it also serves a purpose when transferring the ownership of funds.

A private key comes in the form of a very long combination of alphanumeric symbols and cyphers and is the most crucial part of a cryptocurrency wallet. It offers its holder complete access and control of its connected funds and should be hidden somewhere safe.

It can also be used to generate the information required for cryptocurrency to be received from another entity, without giving away any information about the private key itself.

How does a cryptocurrency wallet work?

Private keys serve as proof of ownership to a blockchain network, which is vital when attempting to perform a transaction.
A transaction request is always earmarked with a digital signature representing the requester’s unique private key.

This enables proof of cryptocurrency funds, without having to expose a private key’s detail - like showing a stranger the contents of bank account, without giving away its password
This is when a wallet broadcasts the transaction request for verification to the node network.

Each wallet also has a unique public address, or what’s known as a public key. The public key serves much like a bank account number, and without attached names or personal details, this long list of numbers and letters is the only way to identify an account.

A wallet’s public key is generated by its private key and, much like a regular bank account number, is the information shared with other entities in order to perform a transaction.

Public KeyPublic KeyThe address of a cryptocurrency wallet, much like a bank account number.
Wallets: Introduction

FAQ

What is a cryptocurrency wallet?
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A cryptocurrency wallet is a software program enabling users to send, receive and monitor their cryptocurrency balance, providing a place from where funds are accessed, and all transactions are made.

How is a cryptocurrency wallet different to a regular bank account?
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A cryptocurrency wallet is like a regular bank account in that it is designed to offer users access to a network of fellow traders while keeping an up-to-date balance following transactions. A cryptocurrency wallet is also very different to a regular bank account because it never actually holds any type of cryptocurrency. Cryptocurrency is immaterial, even in the digital world. When users trade cryptocurrency, they are trading ownership, which is recorded on a ledger, or the blockchain.

How do wallets work?
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A sender bundles a transaction request with their wallet, labelling it with the receiver’s public key. The bundle is locked and encrypted with the sender’s private key, No one can view the bundle’s details, except for the receiver. The receiver uses their own wallet’s private key to open the bundle, and the sender’s public key to decrypt the contents.

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