Future of Fintech
What is a cryptocurrency wallet?
A crypto wallet is a program or physical device that allows you to store your keys safely and securely. They also enable the sending and receiving of cryptocurrency like Bitcoin and Ethereum, as well as transfers between bank accounts.
Crypto wallets typically consist of two kinds of keys, private and public. Private keys hold the passwords that grant you access to your cryptocurrency, while public keys serve as the address to send crypto to your wallet.
Why are crypto wallets important?
Unlike a normal wallet, cryptocurrency wallets technically don’t store your crypto. Your holdings live on the blockchain, but can only be accessed using a private key. Your keys prove your ownership of your digital money and allow you to make transactions. If you lose your private keys, you lose access to your money. That’s the reason it’s important to keep your hardware wallet safe.
Types of crypto wallets
There are two main types, “hot” wallets, which remain connected to the internet, and “cold” wallets, which function primarily offline.
A hot wallet means any crypto wallet that is connected to the internet. They’re generally easy to use, so most types of crypto wallets are of the “hot” variety. Hot wallets’ always-on nature makes them more convenience, but that very same trait also makes them more vulnerable to hackers. Because of this, it is not recommended to keep large amounts of cryptocurrency in a hot wallet.
Cold wallets, encompass any type of wallet that is offline, or not connected to the internet. Since the only way to interact with the blockchain is through the internet, cold wallets are considered highly secure and virtually impervious to hackers. Cold wallets tend to require a bit more technical knowledge, so they’re typically suited for more experienced users or those with large amounts of assets.

How do crypto wallets work
With a physical wallet, individuals can hold fiat currency or bank and credit cards, which enable access to funds. A crypto wallet doesn't actually hold cryptocurrency, but rather holds the privileged credentials needed in the form of private keys to access the blockchain for a given cryptocurrency.
With a traditional bank, users receive bank accounts with account numbers. With a cryptocurrency blockchain, the public key serves the same basic concept as the bank account number. Simply having a bank account number or a public key isn't enough to conduct a full set of transactions with an account.
Blockchain works with a public key infrastructure model for cryptography, where there is a public key and a private key that are only supposed to be known by users that hold a given asset or cryptocurrency. Both a public key and a private key are needed to access and transfer cryptocurrency. Just as a private personal identification number is used to access a bank account with a bank card, a private key is needed to access the asset on a blockchain.
Crypto wallets hold users' private keys and information where the public keys are located on the blockchain. With the combination of both public and private keys, a crypto wallet can enable a secured operation to validate a balance and send or receive cryptocurrency transactions.
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