A crypto wallet is a digital wallet that holds digital currencies. It can either be hot (software solution, which is always connected to the Internet) or cold (hardware solution). It stores private and public keys, which are needed to manage the funds it contains. As well, every public key is associated with a certain crypto address.
What is a Crypto Address?
A crypto wallet address is the product of hashing a public key, in which an individual’s public key associated with their wallet is converted into an unmistakable set of letters and numbers. This distinct combination serves to identify a particular destination on the blockchain platform.
Users can easily exchange wallet addresses for performing transactions with their crypto.
In comparison to a public key, a personal wallet address can offer two major benefits:
- It is created using hashing techniques, which provide an additional layer of security.
- It is shorter and easier to manage than a public key.
What is a Private Key?
Your private key is an incredibly secure password that unlocks and allows you to spend the cryptocurrency associated with your corresponding public key. Unlike public keys and addresses, it’s imperative to keep this information hidden at all times; individuals who have access to your private key may be able to steal any digital currency owned by you.
In terms of managing private keys, custodial and non-custodial wallets exist. Custodial wallets are provided by a third-party service provider who manages and stores your private keys on their secure servers, while non-custodial solutions give users full control over their private keys.
Crypto Wallets and Addresses — How Do They Differ?
Crypto wallets are crypto storage solutions for your digital funds, while addresses are a string of characters that represent the destination to which a cryptocurrency can be sent. Wallets and addresses belong to the same blockchain network and work together in order to transfer value from one user to another.
A crypto wallet, often referred to as a digital wallet or cryptocurrency wallet, is a software program or device that enables users to store, manage, and interact with their cryptocurrencies. It serves as a digital vault for your virtual currencies, similar to a physical wallet that holds your cash and cards. However, crypto wallets do not actually store the digital assets themselves; instead, they store the cryptographic information required to access and manage those assets securely.
Crypto wallets come in various forms, including software wallets, hardware wallets, web-based wallets, and mobile wallets. Each type offers its own set of advantages and security measures. Software wallets are applications installed on computers or smartphones, providing easy accessibility. Hardware wallets, on the other hand, are physical devices specifically designed to store private keys offline, providing a high level of security by isolating the keys from internet-connected devices.
Private keys are the most critical aspect of cryptocurrency ownership. They are long, randomly generated strings of characters that act as the secret password or key to access and control the funds associated with a crypto address. Private keys are mathematically related to the public keys and crypto addresses, but unlike public keys and addresses, they must remain confidential and never be shared with anyone.
A private key is essentially the digital equivalent of the key to your safe deposit box. It provides the authority to sign transactions and authorize the movement of funds from your wallet. Losing your private key can result in permanent loss of access to your cryptocurrencies. It’s crucial to store private keys securely and back them up through methods such as hardware wallets, encrypted digital files, or even paper wallets.