From the previous post, you guys should know what is a crypto exchanges. So where can you store your assets? If in real life we have wallet to keep fiat, the same for crypto, we need a wallet to store, send and receive assets. Now let’s find out what is crypto wallet and how does it work.
Source: Easy crypto
It is essentially a place to store your cryptocurrency, it is used to send, receive money and keep track of balances.
They are like a key to open a blockchain vault, without the key, it is impossible to open the vault. And without them, there would be no way for you to prove ownership of your crypto assets.
Millions of people have used crypto wallets, but they have a misconception about it, and how it works. Unlike traditional wallets, in reality, cryptocurrencies are not stored in any location or exist anywhere in any physical form.
All that exists are records of transaction history stored on the blockchain.
When a person sends you Bitcoin or any other coin, they are essentially signing a claim transferring ownership of it to you.
To be able to use those coins and unlock it, the private key stored in your wallet must match the public address of the assigned coin. If the public and private keys match, the balance in your wallet increases and the sender decreases accordingly. There is no actual exchange of real physical money. Transactions are represented only by a transaction record on the blockchain and a change in the balance in your wallet.
There are 2 main type including hot wallet and cold wallet
It can simply understood that this wallet alllow you to trade whenever you want over an internet connection. It have 2 types: online wallet (use for CEX) and software wallet (DEX)
For this, it working on cloud system work 24/24 and can easily access by any electrical device at any place. However, it can be control by third party (CEX wallet creator), so your safety is not completely secure if you deposit your money to uncertain project. On the other hand, if you choose prestige, high secure CEX such as Binance, Coinbase, FTX, etc. You don’t have to worry about this
Software Wallet work as an application which can be download and set up on PC, Laptop or Mobile. With this type of wallet, you will directly manage your keys, but if your computer or phone is stolen or damaged, your assets will follow. For example: Solareum, Metamask, Trust Wallet, etc.
It is like your bank account, it will automatically receive money when someone sends it to you without having to connect to the internet (but you still have to connect to the internet if you want to check balance fluctuations, like internet banking).
In simple terms, it is a piece of paper containing your keys (public and private) with a QR code, so you can use it by scanning it for transactions. Some reputable services provide such as: Myetherwallet, BitAddress, BitcoinPaperWallet, BitcoinAddressUtility, SafePaperWallet.
Hardware wallet (Cold wallet)
The wallet will store the private key on an external device such as a USB. Although it transacts online, the private key is left on the device instead of a 3rd party so it is more secure, but like Softwarewallet, if you lose your device, it will also be lost. Some prominent hardware wallets such as Ledger Nano S, Trezor.io, KeepKey.
Hopefully through this post, you guys know what is a crypto wallet and how it works. Follow us to gain more knowledge in crypto industry.