A cryptocurrency wallet and how it is differentiated from a regular cash currency wallet is one of the major concepts that is important to understand when entering the world of cryptocurrency and blockchain technology for the first time. Since the first successful application of blockchain technology involves digital currencies, it is primary to understand how a digital cryptocurrency wallet functions, what it actually is, and what the major details surrounding it are. Check out the 5 types of cryptocurrency wallets here.
One of the most important aspects of a digital wallet versus a traditional wallet is the fact that a digital wallet does not physically store the currency. This means that when cryptocurrency is sent or received from one digital wallet to another, no coins are moved but only transaction data is recorded, and the digital balance is altered for the sender and receiver of funds. Users of digital wallets have only two functions they can perform, they can check their digital balance and they can send or receive digital funds.
Now that you understand the concept of a cryptocurrency wallet, it is important to understand the two major keys that make up the wallet. After all, a digital wallet is just a software program that stores these two keys. These two major keys are called a private key and a public key. A mailbox is a simple analogy that makes it easier to understand how the public and private keys work. A mailbox usually stands on the street at a public location where anyone has access to its public address. Anybody who knows the address can drop a letter in the mailbox. Only the owner of the mailbox has a key that opens the mailbox to read the messages. Therefore, in the mailbox example, the public key represents the address of the mailbox which allows people to know where to send you messages. A private key is like the key that the owner uses to open his mailbox to read the messages. A private key is only known to you and you shouldn’t share it with anybody. However, your public key is like an address that everybody can find and has access to.
One important difference from the analogy is that these keys are not actual physical keys and they consist of a certain length of upper and lower-case letters mixed with numbers forming a long chain of characters. Through the process of asymmetric encryption, both your wallet’s private key and public key are linked to each other. This link is done through an intensive mathematical process that alters the private key into a public key. The mathematical encryption prevents the ability to reverse engineer your public key back to your private key ensuring security of your digital wallet.
Author: blckchainexplain
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