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What is a Crypto Wallet, or Cryptocurrency Wallet?

CryptoLion

CryptoLion

The Crypto wallet

A crypto (currency) wallet is a device, physical medium, program or a service, which stores the public and/or private keys. This can be used to track ownership, receive or spend cryptocurrencies. The cryptocurrency itself is not in the wallet. In the case of Bitcoin and cryptocurrencies derived from it, the cryptocurrency is decentrally stored and maintained in a publicly available ledger called the blockchain.

Functionality of the wallet.

A cryptocurrency wallet, you can compare it with a bank account, contains a pair of public and private cryptographic keys. A public key allows your wallet to make payments to the wallet’s address, where a private key enables the spending of cryptocurrency from that address.

Crypto Wallet types

There are two kind of wallets. They are digital apps or they are hardware based. They store the private key with the user, or the private key is stored remotely and transactions are authorized by a third party.

Key derivation

Deterministic wallet

With a deterministic wallet a single key can be used to generate an entire tree of key pairs. This single key serves as the root of the tree. The generated mnemonic sentence or word seed is simply a more human-readable way of expressing the key used as the root, as it can be algorithmically converted into the root private key. Those words, in that order, will always generate exactly the same root key. A word phrase could consist of 24 words like: begin friend black earth beauty praise pride refuse horror believe relief gospel end destroy champion build better awesome.

That single root key will not replacing all other private keys, but rather is being used to generate them. All the addresses still have different private keys, but they can all be restored by that single root key. The private keys to every address it has and will ever give out can be recalculated given the root key. That root key, in turn, can be recalculated by feeding in the word seed. The mnemonic sentence is the backup of the wallet. If a wallet supports the same (mnemonic sentence) technique, then the backup can also be restored on another software or hardware wallet.

A mnemonic sentence is considered secure. The BIP-39 standard creates a 512-bit seed from any given mnemonic. The set of possible wallets is. Every passphrase leads to a valid wallet. If the wallet was not previously used it will be empty.

Non-deterministic wallet

In a non-deterministic wallet, each key is randomly generated on its own accord, and they are not seeded from a common key. Therefore, any backups of the wallet must store each and every single private key used as an address, as well as a buffer of 100 or so future keys that may have already been given out as addresses but not received payments yet.

Below there is an example of a hardware wallet, go check it out.

Ledger Nano X - The secure hardware wallet
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