We are the generation that is witnessing a drastic digital revolution. Everything is digitalizing, from calling to financial matters, and now and then, we develop new technologies for the same. But did we ever think that we will deal with virtual and not physical currencies, still valued in thousands of dollars? Well, that is what cryptocurrency is. So today, we will be discussing this trending topic of ‘cryptocurrency,’ its details, and the functionalities of a blockchain wallet or crypto wallet.
What is a cryptocurrency?
A cryptocurrency is a digital or virtual currency meant to act as a medium of exchange. It is a decentralized form of digital currency, created and held electronically, and there are no physical forms such as coins or bills. A unique method called cryptography verifies and secures transactions related to cryptocurrency. It also takes inhibits the creation of new units of a particular cryptocurrency.
The decentralized control of each cryptocurrency works on a distributed ledger technology, known as a blockchain, that serves as a database to record all the public financial transactions. You can make transactions without an intermediary like a bank. But the transaction is confirmed by the exchange and recorded in the blockchain.
Cryptocurrencies use a decentralized control method. It means it does not have centralized electronic money and central banking systems.
For example, Bitcoin is a popular and the most significant cryptocurrency today. From its inception in 2009, by an unknown person using the alias Satoshi Nakamoto, Its price made an all-time high of $68,000
What is a blockchain wallet or crypto wallet?
A blockchain wallet or crypto wallet, is a software program that stores your digital currency. Blockchain wallets can be hosted by exchanges or online wallets. You can also download them on your computer or mobile device as an app. You can create a blockchain wallet by signing up with a provider that offers this service. The provider will create your wallet and store your private key in its database. Blockchain wallets allow their users to have complete control over the security of their money. They decide when they want to send or spend their coins. For this, they only need to enter the wallet address and the number of coins that they wish to transfer. A blockchain wallet can be used by anyone, whether you are a user who makes daily transfers or a business that accepts payments in cryptocurrencies.
Working and features of a blockchain wallet
A blockchain wallet is a medium to store, send or receive cryptocurrencies. A cryptocurrency wallet consists of two parts: a public address, and a private key. A public address is available to everyone using which, people can send money to your wallet. However, a private key is a secret PIN that grants access to the funds in your wallet. Keep this code private because anyone with access to it can move your funds. The private key is a key to send cryptocurrencies to different wallets. On the contrary, the public key is a key to receiving cryptocurrencies from others’ wallets.
Honestly, we perceive blockchain wallets as one of the most promising applications of blockchain technology. They are used to store cryptocurrencies and make transactions both within the network and externally. It is a safe place where users can keep their crypto assets, transfer them, and trade them for cash.
This type of wallet works on a blockchain mechanism, a very secure and fast way of storing data. A blockchain is a list of records, or blocks, that is constantly growing. These are linked and secured using cryptography. Each block typically includes a hash pointer to connect to a transaction data, previous block and which has a timestamp too. By design, blockchains are inherently resistant to data tampering and modification. So this makes it a very secure digital ledger to store data and transactions because nobody can modify this data.
Types of blockchain wallets:
There are 4 types of cryptocurrency/blockchain wallets:
Web-based wallets:
Web-based wallets are websites that host a wallet and allow the user to access it from any computer via their browser. Some exchanges also offer web-based wallets for their customers.
Web-based wallets are easy to use but are not secure because the server stores the security keys. Hence, there is always a risk of cyber hacking. A compromise of this type of service would allow an attacker to gain full access to the hosted wallet and all of its funds.
Mobile wallets:
A mobile wallet is a mobile application developed and managed by wallet providers. You can download it from the play store or app store. They are accessible on your mobile phones or tablets only. Users can expect higher privacy of their private key compared to web-based wallets.
Desktop wallets:
As the name suggests, a desktop wallet is available on PCs. One good thing about this is you do not need to worry about third-party access or data breach. The desktop wallet ensures safety as only the real owner or user can access it.
Hardware wallets:
Hardware wallet lets you store your cryptocurrencies in hardware storage devices like Hard disks. You can access it by connecting it with the PC. It is considered most secure because its access is limited to you only, and there is no third-party involvement. You can set up a security password to restrict its access.
Final words
So, in this fast-moving world, we come across many new technologies and, digital currency is one of them. It is necessary to know the specifications, merits, and demerits of everything before we start using it. So, cryptocurrency investing and trading is the most recent, known, and hot topic, and believe me, it is worth a try!
Know more about crypto lending here.