What is a cryptocurrency wallet

What is a cryptocurrency wallet?

A cryptocurrency wallet is where we store our private keys. Cryptocurrencies do not leave their networks, so their ownership is determined by access to a password that will allow us to transfer them. A private keyjaxx bitcoin wallet is a long random string of numbers and characters that is almost impossible to remember. The cryptocurrency wallet is where we saved it.

Example:

If I have 2 bitcoins and I want to send them to Andrzej, I need to know his public address. It's like a letter being sent to someone else's mailbox - you need to know the address and enter it. The letter reaches the box, but in order for Andrzej to be able to take it out, he must have a key to open it. If Andrzej loses the key, it will not end up in the contents of the box.

The difference between the mailbox key and the private key that gives us access to our cryptocurrencies is that the latter cannot be reset or recovered. There is no locksmith to open our box. If you have lost access to your private key, you have lost your cryptocurrencies. This is why wallets were created.

A cryptocurrency wallet is used to store private keys. "Physically" all bitcoins and other cryptocurrencies are still on their networks - blockchains. They are assigned private keys that make these funds the sole owners.

It should be added that there are wallets designed only for certain cryptocurrencies and supporting many of them. If we send a certain cryptocurrency to a wallet that is not designed for this, we are likely to lose it. Of course, everything will be taken on paper - a paper wallet, which is a private key written on a piece of paper.

Wallets are divided into hot and cold:

A cold wallet is securely hidden - offline: disconnected from the network, safe, resistant to hacker attacks, best suited for storing large amounts. An example of such a wallet is a paper wallet or a disabled hardware wallet like Ledger or Trezor.

We have a hot wallet for purchases - it is online: it is constantly connected to the network. It can be on our computer or on a mobile phone. There are browser versions available on many devices and similar to banking applications. On the one hand, hot wallets are more convenient to use cryptocurrency, but on the other hand, they are less resistant to theft. It is better to treat them like a wallet for small expenses.