Before I go any further a Crypto Wallet brief, I want you to consider how you store your real-world cash. You don’t walk around in your pocket with this, do you? Instead, you’d most probably store it with a leather wallet or purse, or maybe even a piggy bank!
Anyway it’s smart to store your money where it’s safe. A wallet follows the same basic concepts of crypto-currency.
Nevertheless, by accessing a crypto wallet you would be able to send and obtain Bit coin and other crypto currencies (more than 1,500! already exist!).
So, now that you have a good understanding of what is being used for a crypto currency wallet, I’ll explain how it works in greater detail.
How does a wallet work in the Crypto currency?
In the section above, I used the example of a real-world leather wallet, assuming as your cash is physically in the pocket. However things are somewhat different in the digital world of crypto currency and block chain technology.
Coins are not usually kept in a physical wallet, since there is no physical presence of crypto currencies. Alternatively, the block chain consists of transactional records recording which private and public key governs the funds. I would quickly explain the role of a wallet address, as well as a private and public key, because they are linked to each other, to ensure that you have complete understanding.
An address on a wallet is like a number on a bank account. There is no harm in giving someone else your bank account number, because if they want to transfer their money, they will use it. It may be so that your employer can pay you your wage, so that a client can pay your invoice or so that your family and friends can give you some money for birthday!
In the world of crypto currency, if anyone wants to transfer their coins, you simply give them your wallet address. No two wallet addresses are always the same, which means there is no risk that someone else can get your money.
Using as you can see the upper- and lower-case combinations of numbers and letters. Since most block chains are clear, the amount of money a certain crypto currency wallet has, as well as the previous transactions that the owner has made, is simple to find out.
However, a crypto currency wallet address doesn’t reveal the real-world identity of its owner, which is why the block chain is called “pseudonymous.” How do private and public keys connect to an address in the Wallet?
So, now that you know that a wallet address is really close to a bank account number, I’m going to clarify how the power of the funds is being given. A public key is assumed by many to be the same as a public wallet password, but that’s not valid.
Essentially, each individual Crypto currency wallet address (remember, no two addresses can be the same) has a unique private and public key. The private key lets you get access to funds linked to the crypto wallet code.
To give you a true-world example, when you want to transfer money from your bank account to someone else’s bank account you may need to enter your private password. No-one else has access to the password, not even the ATM.
A private key does almost the same thing except it’s linked directly to the crypto wallet’s actual address. What, instead, is a public key?
Mathematically, your wallet address is connected to a public key! However, it is a “hashed version” which I will clarify below.
A hash function allows a sequence of letters and/or numbers (called an “input”) to be encrypted into a new set of letters and/or numbers (called an “output”). It offers an extra security shield, which ensures that you can not reach your wallet.
Now, I know what you think: Are these two key sets completely different? And, indeed software technology knows to the human eye that the two keys are directly connected to each other! That means that you are the owner of the coin and that helps you to transfer funds whenever you wish!
The main thing to note is that everything that I’ve been talking about here is highly technical. Nevertheless, the app does everything you need when using a crypto currency wallet.
You don’t even have to understand the code running in the background, the likes of Gmail and Hotmail are doing all about emails for you— like a crypto currency wallet for crypto-transactions!
And you have stated clearly that the coins are not contained in Crypto Wallets?
If you’ve read my guide so far, you’ll already have a good understanding of what a crypto currency wallet is, and how public and private keys are linked to a shared wallet address. You can recall earlier that I said not always the coins are deposited in the wallet? It is valid! Let me get it worked out.
Since Bit coin and other crypto currencies aren’t physical currency, they are digitally stored in the block chain. The block chain is like a giant accounting ledger that records every single transaction ever happening inside the network, as well as each public address’s total account balance.
The software is directly connected inside the crypto currency wallet to the block chain, so you can send transactions to the ledger. However, the crypto-wallet is the protocol which generates both public and private keys. For that you won’t be able to access your savings in the real world.
To get a clearer view of the relationship, think of walking into a shop and paying for things using a debit or credit card. There is no exchange of physical cash between you and the stores. Nonetheless, by entering your private pin number, you check that you own the funds and then they can transfer the money from your account to your store account.
It’s the same as a Crypto currencies wallet. Through entering your private key, you can verify whether you own the coins, and then pass them to someone else. It’s the only way the coins can pass from person A to person B. So, now that you know the function of a cryptocurrency wallet, let’s take a look at the different styles available and what every white label cryptocurrency exchange should consider while providing the wallet option based on their business practices.
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