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An Introduction to Blockchain Wallet
What is a Blockchain Wallet?
Blockchain wallet is a kind of digital software that works on blockchain technology to store private and public keys, monitor and record all transactions that are related to those particular keys on the blockchain. In other words, a blockchain wallet does not really store crypto, instead it stores all the records related to the keys on the blockchain on which you host the wallet. All the features needed for safe and secure fund transfers and exchanges amongst different parties are available in a blockchain wallet.
Basically, the wallet comes in the form of an ID, which allows it to track all transactions within that ID. This ID is known as the blockchain wallet address – which is in turn linked to the public key and private key discussed above.
Similar to a cash wallet, a blockchain wallet allows its users to store, send, receive and manage all (single and multiple) digital assets on its
blockchain. For example, if you are investing in different cryptocurrencies, your blockchain wallet can store, send, receive and manage all the assets.
In this article we will talk about why a blockchain wallet is important, how it works, the features of the software, and a brief discussion on the different types of
Why use a Blockch ain Wallet?
Let’s take the example of a traditional banking system in place today. Several problems are encountered for basic transactions. Each transaction goes through an intermediary, which makes that intermediary the central point of failure.
Furthermore, there are issues when it comes to keeping a track of accounts and balances – data can be hacked, manipulated, or can go corrupt across several systems that store this data. With the help of blockchain wallets, these problems can be reduced or eliminated.
How do Blockchain Wallets work?
The process is very similar to how you would use PayPal or any other gateway to make payments online, only with blockchain wallets, you use cryptocurrency.
To understand the process, you need to learn about private and public keys in relation to a blockchain wallet. Each blockchain wallet created comes with a private and public key. To send and receive emails for example, you would use your email address. But by giving your email address to another, they won’t be able to access your inbox or send emails from your account. For that, someone would have to know your password.
So, your email address is the public key which you can share to anyone to receive emails/funds, and your password is the private key. The private key of your
blockchain wallet should be kept highly secure. You do not want your email to get hacked. Similarly, if someone can access your private key, your account is at stake and may result in loss of all cryptocurrencies being managed.
Features of a Blockchain Wallet
- Highly user-friendly – similar to any other software or wallet that you
would use on a daily basis.
- Extremely secure; as long as your private key is safe with you.
- Instant transactions across geographical boundaries are possible without any intermediaries or barriers.
- The cost of transferring funds on a blockchain wallet is significantly lower as compared to traditional banks.
- Transactions between multiple cryptocurrencies are possible, making currency conversions very easy.
June 8, 2022