A crypto wallet is a wallet where you store, receive and transfer your Bitcoins and altcoins. It is made up of a private key that only the owner can know. And one or more public keys, which can be shared. This wallet can be found as hardware, software or paper […]
If you read the post “What is Bitcoin?“, maybe you are now wondering how to use it. The answer is: through a cryptocurrency wallet!
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What is a crypto wallet?
The cryptocurrency wallet is a wallet where you store, receive and transfer your Bitcoins and altcoins. It is made up of a private key that only the owner can know. And one or more public keys, which can be shared. This wallet can be found as hardware, software or paper. Each model has its usability, but in the end, the mechanism is the same.
I need to highlight here at the beginning of the text that:
- If you are going to send Bitcoins, send only to a Bitcoin wallet;
- If you are sending Ethereum, send only to Ethereum wallet;
- Never send tokens or cryptocurrencies to a wallet that belongs to another Blockchain;
- If you send Bitcoin to a Litecoin wallet, for example, you will lose all your coins!
How does a Bitcoin wallet work?
The wallet is a way to interact with Blockchain. That is, it is the “bridges” between us and the Blockchain. It consists of a private key and a public key. The combination of these keys reveals the exact location on the Blockchain where the cryptocurrencies or token are.
- Don’t know what Blockchain is? Then read this full post, updated in late 2020: “What is Blockchain? Explaining this technology!“
Private key of a digital currency wallet
The private key of a crypto wallet is the primary key. As if it were the “password” to be able to access the wallet. So it must be a secret that only the owner knows. Anyone with access to the private key, will be able to locate the wallet and transfer the funds to other person.
🚨 Granny WARNING
Do not write down your private key on the computer. Not in an online notepad or in your email box. Much less smartphone apps. Anything that can connect to the Internet can be attacked and stolen! So let go the laziness and write down your private key on paper and keep it in secret very well!
The private key is unique for each wallet and is an alphanumeric code that looks like this:
Remember that in the text “What is Blockchain?” I said that before data is written on Blockchain, it needs to be validated? And that this validation occurs through mathematical calculations? It is from this sequence of numbers and letters that your wallet gets the ability to send your Bitcoins to other people. After those calculations, your transaction is validated.
You can also think of your private key as the secret coordinates for locating your Bitcoins. In other words, anyone who knows your private key has complete control over the cryptocurrencies contained there!
What is the private key for?
“Jessica, when am I going to use the private key?”
Well, now that you understand what a private key is, I’ll tell you when you’re going to use it. You understand that you open your wallet with it, right? Anywhere in the world, on any device.
Let’s suppose you have a wallet on your smartphone, which, like me, uses Coinomi, for example. And then, on a beautiful sunny day, your cell phone falls on the toilet (it happens right? 🤷🏻♀️). Even more when you are taking that beer on Friday and forget your cell phone on the bar table.
Anyway, lost your smartphone? And your cryptocurrency fortune in the wallet? Lost all your fortune? Didn’t your parents warn you that this Bitcoin business was a bubble? They told you!
Just as Bitcoin is not a bubble, you don’t lose your crypto just because you lost your device! That is, as long as you write down your private key!
In this case, just insert your private key into another wallet, from any device and wait a few minutes. There, your funds will be there again!
The private key is also used to generate your wallet address, which we will now see as the public key.
Crypto wallet address or public key
This address is something that you share with people who want to send you Bitcoins. It’s like your deposit account.
The wallet address is very similar to the private key. But it should not be confused! It is also an alphanumeric address and is usually smaller than the private key. It will look like this (below the QR code):
This address is the address of my Binance account. And see that it’s okay to share this public key here on the site. The most that will happen is that you look at my transactions or send me Bitcoins 💁♀️
These wallet addresses are generated from the private key. However, there is no way to find your private key just by looking at a wallet address.
In fact, it is often difficult for us to find our own private key. Good! So we don’t run the risk of sending the private key instead of the address!
What is an crypto wallet for?
When I talk about Bitcoin wallets, cryptocurrency wallets, altcoins, virtual or digital currencies, I’m talking about the same thing. After all, the wallet mechanism will be the same for any cryptocurrency!
In short, the main function of the wallet is:
- Create one or more public addresses;
- Crypto storage;
- Send and receive cryptocurrencies by combining and using a private key with a public key (wallet address).
In other words, the cryptocurrency wallet automates the complex cryptography of Bitcoin and other altcoins, for you! That is, it facilitates the use of Blockchain, transforming the computer language into something that humans can understand.
In this tutorial on Coinomi, I explain step by step how to create the wallet, receive crypto, store and send them. So you will see in practice everything I just said here. I even think it should be a text to read along with this one, lol
What is a Hierarchical Deterministic wallet?
Well, let’s agree that having to write down that huge alphanumeric address for your private key is a pain, right? A little letter, an “A” that you miss there… you’re lost! The code must be IDENTICAL!
Also, what if you don’t want to write down the private key but rather memorize it? Think about it, then no one can steal you!
What is the cryptocurrency wallet seed?
As Bitcoin wallets evolved, HD (hierarchical deterministic) wallets were created. HD wallets turn the private key into a string of words. This sequence of words is known as “seed”. Which is just a mnemonic phrase.
Mnemonic! It is a phrase created with a set of memorization techniques. Exactly to make it easier for you to remember! This seed (wallet seed) is a series of common words that you can memorize instead of the confidential, long and confusing alphanumeric key.
If you’ve tried to create a wallet, you’ve certainly noticed that you’re always asked to save at least 12 random words.
Hierarchical Deterministic cryptocurrency wallet addresses
An HD wallet can create many public addresses in the same seed. So even if you have 10 public addresses, all Bitcoins will be within the same private key.
In particular, I love being able to do this division within the portfolio. For example, I create an address where I only store cryptocurrencies that I receive for payment from my customers. At another address, I place virtual currencies that I am doing HODL (I explain this term in this text). In another portfolio, I leave the crypts that will be destined for some project and so on.
Ultimately, all cryptocurrencies are within the same wallet. Just use my seed to open it.
Different types of wallets
Although the mechanism of Bitcoin wallets is similar, there are several types of wallets. I’m creating a unique post for each type of wallet – and a tutorial on security tips as well. Soon, you can click on the links to see new content.
9 types of cryptocurrency wallets
- SPV – simple payment verification;
- Hot wallets;
- Cold wallets;
- Desktop wallets;
- Mobile wallets;
- Paper wallets;
- Brain wallet;
- Hardware wallets;
- Multi-signature wallets.
Soon we will have a post here explaining how to choose the right type of wallet for each profile and situation.
If you have any questions about your cryptocurrency wallet, contact us on social media or right here, in the comments.
This post was written with great love in 2017 and updated with fresh content for you! <3