As the name suggests, the overall concept is like how a standard wallet is used, but there are some notable differences in how digital currency wallets work.
What is a digital currency wallet?
A digital currency wallet is a software program and it stores both private and public keys. These keys engage and interact with a range of blockchain and this allows users to transfer digital currency while also allowing users to know how much currency you have available.
If you wish to use a digital currency, such as Bitcoin, you must have a digital currency wallet.
How does a digital currency wallet work?
One way a digital currency wallet differs from a traditional wallet is that a digital currency wallet doesn’t store your currency. Of course, digital currency isn’t stored anywhere, nor does it exist in a physical form. All that is noted is a record of the transactions.
When you are sent digital currency from another person, they are signing off the ownership of that currency and transferring ownership into your wallet. If you want to spend this currency, there is a need for the private key that is in your wallet to match the public address that has been assigned to you. If this happens, the transaction can take place.
There is no physical exchange of coins because of course, there is no physical currency with the digital currency.
Are there several types of digital currency wallets?
Yes, there are various digital currency wallets, coming under three main headings:
- Software currency wallets
- Hardware currency wallets
- Paper currency wallets
A desktop currency wallet can be downloaded and then installed onto a laptop and PC, and these wallets can only be accessed from this computer. This creates a strong level of security but of course, if this computer is hacked or is exposed to a virus which causes it to break down, your digital currency could be at risk.
An online wallet is in the cloud and it is accessible from any device that allows internet access. This is a more convenient digital currency wallet for users, but it carries a greater level of risk of being accessed by hackers and robbers.
A mobile digital currency wallet is located on an app on your smartphone and can be accessed anywhere. This is usually a simplified version of currency wallets on computers or in the cloud, but it is usually suitable for most users’ needs.
A hardware digital currency wallet is located on a USB device. This wallet is stored offline, which provides an added level of security.
The level of security you experience with your choice of digital currency wallet will depend on the wallet you use. There are many differences between each wallet, so make sure you choose a wallet that leaves you comfortable with respect to the security on offer.
Date Published: Monday December 17, 2018
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