Hey! Let's talk about the devices/programs that allows you to transfer and store cryptocurrency i.e. Crypto Wallets.
Crypto Wallets such as Coinbase, Metamask, Binance, etc. allows you to send, receive, and spend crypto currencies like Bitcoin and Ethereum.
It is similar to a bank account, but the main difference is that, it is controlled by the key that only you control.
Technically, Cryptowallets don't store your crypto. Your holding live on the blockchain, which can only be accessed using a private key.
Private Key
A Private Key is like a password (string of letters and numbers) that allows you to access and manage your crypto funds.
A Crypto Wallet's security depends on how the private key is stored.
Types of Crypto Wallets
Crypto Wallets falls under two general Categories :
Hardware Wallets & Software Wallets
**Hardware wallets **- Keys are stored in a thumb-drive device that is kept in a safe place and only connected to a computer when you want to use your crypto (a small device that can store crypto offline)
Software wallets - Keys are stored in an app or other software (protected by two-step encryption). This makes sending, receiving, and using your crypto as easy as using any online bank account, payment system, or brokerage. (a computer program or software that holds private key online)
Understanding how Crypto Wallets work?
A simple cryptocurrency wallet contains pairs of public and private cryptographic keys. The keys can be used to track ownership, receive or spend cryptocurrencies. A public key allows others to make payments to the address derived from it, whereas a private key enables the spending of cryptocurrency from that address.
Sending and Receiving funds using a crypto wallet
To use a cryptocurrency, you need a wallet to store your virtual coins and just like a bank account it has a unique address, depending on the cryptocurrency.
Anyone can create a new wallet by generating a public and private key pain with a certain algorithm.
In the case of Bitcoin or Ethereum, Elliptical curve digital signature Algorithm is used. The algorithms will spit out a private key and a public key, these keys are mathematically linked to each other.
you can take the private key and derive the public key from it. but you cannot take the public key and turn it into a private key.
These two keys serves different purpose
public key will become your wallet's address, (like your bank account no.)
private key is your way of proving that you are the owner of the wallet.
public keys can be shared with everyone.
private keys should be stored to yourself. As it can risk security of your wallet.
The following is a randomly generated private key (k) shown in hexadecimal format (256 bits shown as 64 hexadecimal digits, each 4 bits):
1E99423A4ED27608A15A2616A2B0E9E52CED330AC530EDCC32C8FFC6A526AEDD
To receive funds, you need to retrieve an address (public key) from your wallet. Locate the "generate address" feature in your wallet, click it, then copy the alphanumeric address or QR code and share it with the person who wants to send you crypto.
To send funds, you need the address (public key) of the receiving wallet. Locate the "send" feature in your wallet and enter an address of the wallet you intend to send coins to. Select the amount of crypto you'd like to send, and click "confirm." Consider sending a small test transaction before sending large amounts of crypto. Note that sending coins requires a fee that will be paid to miners in exchange for processing the transaction.
Blockchain doesn't have a list of valid addresses, so it cannot check if you are transferring coins to the valid/existing wallet (account). In case, you transfer coins to an invalid address then those coins are lost forever.
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Reference : Simply Explained | BusinessInsider