An Overview of CryptoCurrency Wallets

An Overview of CryptoCurrency WalletsShow more

What is a Blockchain?

A blockchain is a distributed database, or ledger, that shared across many nodes of a computer network.
A blockchain collects information together in groups known as blocks the hold sets of information. These blocks have a specific storage capacity which, when filled, are closed and linked to the previous block that forms a chain of information known as the blockchain.
Different types of information can be stored on a blockchain. The most common use has been to act as a ledger for cryptocurrency transactions.

A physical example of how to visualize the blockchain or ledger is that of the old style paper and ink ledger book. The individual pages represent the individual blocks in the blockchain. Each page containing information about a transaction. Each page is connected to the previous page in the ledger, just as each block is connected to the previous block in the blockchain.
If this physical ledger had a lock, like a diary, then the public key (wallet address), would allow access to the ledger, but only to the individual pages (read transactions) that were associated with the wallet address. A private key would allow a transaction to be written (send transaction) to the individual pages of the ledger.

And, to take the analogy a step further, the keys (public and private) would not be able to unlock ledger entries that belong to someone else, nor could they be used to open entries on another blockchain ledger or mainnet.

What is a Cryptocurrency Wallet?

A cryptocurrency wallet is a software application or hardware device that stores your private keys.
Your coins and tokens, such as Bitcoin, Ethereum, Litecoin, etc., are not actually stored on the wallet.
Each coin exists only the blockchain Mainnet or network, related to each specific coin.

What Are the Private Keys Used For?

The private keys unlock the information on the blockchain, that is related to the transactions performed by the user of the wallet.
The private keys also generate the public wallet address, which is used for reading transactions and receiving coins to the wallet.

A Visualization of a Cryptocurrency Wallet

Picture your cryptocurrency wallet as if it were an automobile.
Your keys to the car would represent the Private Keys of the wallet. They are used to operate the vehicle or sign the transactions of a wallet.
Your Mnemonic Backup Phrase would be represented by the spare key(s) that you have. The more spare keys that exist, the more potential for an unauthorized person gaining access to those keys and accessing your car or wallet! Your mnemonic backup is the most important item to store securely!
The license plate or even the VIN (vehicle identification number) would uniquely and publicly identify the vehicle. This is what your wallet’s public address does, by accessing the wallet to read transactions and receive coins.
The roads and highways would represent the blockchain Mainnet of a particular cryptocurrency.
The transactions would be represented by the movement of the vehicle from Point A to Point B. Or, better yet, if the vehicle has GPS tracking, this would represent the ledger or record of all the transactions performed by the wallet.