Cryptocurrency Wallets
A cryptocurrency wallet is a secure software program that stores private and public keys and interacts with blockchain to enable users to send and receive digital currency and monitor their balance. A wallet can contain multiple public and private key pairs. A cryptocurrency, however, is not a wallet, as it is decentrally stored and maintained in a publicly available ledger. The use of Bitcoin or any other cryptocurrency will require a wallet. What makes the digital wallet different from the physical wallet, is that it does not money; rather it stores public and private keys. Private keys are like PIN number access to your bank account, while public keys are similar to a bank account number.
How it Works
When choosing a wallet, the owner has to be careful with the individual that can have access to a copy of the private keys and thus, potential access to the cryptocurrency. The user needs to trust the provider to keep the cryptocurrency safe. When it is sent into the wrong hands, theft is bound to occur. A classic case is the Mt. Gox hack of 2014. When someone sends another person crypto coins, they are actually transferring ownership of the coins to the receiver’s address. In order to make this transaction complete, the private key stored in the receiver’s wallet must match the public address the currency is assigned to. If both private and public keys match, the receiver’s balance will increase, while that of the sender will decrease.