Here’s what you need to know about how crypto wallets work
With all the chatter surrounding cryptocurrency, more and more people are venturing into the world of digital currency and crypto coins. However, before doing so, it is important to understand how the components of the cryptocurrency ecosystem work. One of the first things a user needs to manage cryptocurrency is a crypto wallet. And it serves the purpose of the traditional wallet with other crypto-specific features. At the basic level, a cryptocurrency wallet has several similarities to the regular wallet as it helps you store cryptocurrency. In addition to that, it also allows users to send and receive digital currencies.
For a user to trade cryptocurrencies, it is essential to have a wallet address to facilitate transactions. A cryptocurrency wallet is a software program that contains public and private keys unique to the owner of the particular wallet. Wallets allow you to interact with blockchains, allowing you not only to make purchases and transactions, but also to monitor the balance.
While the public key can be compared to a username, a private key can be compared to a password. It is therefore essential that users never reveal their private keys. When a user sends another cryptocurrency, the recipient must be able to match the private key with the public key to release the funds and spend the coins. Although there is no exchange of coins or currencies, the transaction performed is reflected on the transaction record on the blockchain. This, in turn, will cause a change in the balance of the cryptocurrency wallet of the sender and the recipient.
There are different types of wallets, such as desktop wallets, mobile wallets, and web wallets, depending on the platform and device you use them on. Depending on the type of cryptocurrency, wallet and type of transaction, transaction fees may be attached, the value of which varies.