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What is Blockchain Wallets?
A Blockchain (or cryptocurrency) wallet is a software program that enables users to buy, sell, and monitor balance for their digital currency (or assets). If you are involved in the exchange of Bitcoin, Ethereum, or other cryptocurrencies, then you must be using a Blockchain wallet of any type (different wallet types discussed later).
Unlike traditional pocket wallets, Blockchain wallets do not save cryptocurrencies. They keep a record of all transactions (sell, buy, exchange) related to the currency and store them on Blockchain.
How do Blockchain Wallets work?
A cryptocurrency wallet stores private and public keys for a transaction. The wallet interacts with multiple Blockchains to validate a transaction, enabling users to purchase or sell one or multiple cryptocurrencies. But, what exactly happens in the background that makes a safe, cryptocurrency transaction possible? Let’s understand it with an example.
These keys work very similarly to the lock-and-key concept- your lock (private key) and keys (public key). No matter how many people have the keys, they can only be of use, if it is used to open the right lock, i.e. the private key is rightly paired with the public key.
- Once you unlock the locker, you can see what’s stored in it. Similarly, when the public and private keys used in transaction matches, users can see the value of their digital assets (Bitcoins, ICO tokens, etc.) in their wallets.
Example: Say, someone sends you a Bitcoin or any other digital currency. When doing this, the sender is assigning you the owner of that currency to the address of your Blockchain wallet.
Types of Blockchain Wallets:
There are three types of cryptocurrency wallets available to store and reflect a transaction on Blockchain.
1. Software Wallets:
Desktop: They wallets can be downloaded on a PC or a laptop and can only be accessible from the system they are installed on. If anywhere access is not something that you’re expecting, then software wallets are good to go.
Online: Since these wallets run on the cloud, you have the advantage of accessing them to any device (mobile, tablet, desktop) through a web browser.