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What is a cryptocurrency wallet

Posted on: October 9, 2017, by :
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Dan Muresan

Founder of Safe Crypto Trading & helping people to reach financial independence, investing in cryptocurrencies and blockchain technology. I worked at Fortune 500 international corporations from USA and Europe. Early adopter and investor in cryptocurrencies and stock markets, entrepreneur.

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There is a lot of stuff to learn about crypto wallets, and I will tell you all about it. Some of them are safer than others, but first, here are a few things that should get you familiar with what a wallet is.

When we talk about crypto coins, we talk about wallets that usually contain a private key and a public key (or addresses for receiving bitcoins). You can think of them as an example of the email. You have an address and a password. In order to receive emails you need to give people address, and to read your emails and send. Emails need your password. In fact, the system does not care who the person has the private key. Maybe it’s not a person, or a company. It can also be a software…

Private keys

If you want to trade crypto, you need your own private key that you need keep it safe and do not tell anyone. Who controls the private key controls the sum of bitcoins. Let’s say you want to buy from me 1 bitcoin. The first step is to install a wallet (on your phone, laptop, tablet, or desktop) to access a web wallet, or buy a wallet hardware. Wallet is a special application that knows how to create a private key, public keys (you can have one for each transaction, or one for all) and get it display / manage the balance of bitcoins.

After you’ve chosen a wallet, you create your private key (a file containing a long string of alphanumeric characters, for example made of digits and letters). Then you generate a public key (address) that you send to me. Do not be scared. I can not to sneak your  assets with this key. All I can do about it is to send you the coins and see how many coins have been sent to you at this address. After receiving your public key, I go into my wallet and tell it to send 1 bitcoin at the address you received (address and public key are the same).

Transactions

To ease this process, your address is transformed by your wallet somehow in a square image (QR code). I just need to scan that code with my phone’s camera. Wallet takes all this information, and creates a message with details of the transaction. It adds a digital signature (a unique number), created using my private key and sends it to all blockchain nodes (broadcast). Then begins the competition between the miners (which I mentioned in a previous article, here). Afterwards, about a couple of seconds or minutes (may be more if there are many network transactions in that moment) the coins will be in your account. And that’s going to happen even if it’s Saturday or Sunday, or if it’s 04:43 AM at night. And if you are in Nepal and I’m in Tenerife. (I know you prefer reverse)

If you have not had used the process before, it’s normal to find it difficult to use, but it’s not like that. When you first make a transfer, you’ll see how simple it is. And it’s ok for you and your pockets to make it happen sooner than later.

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