What is a blockchain wallet and why do I need one? A question asked by many who are venturing into the field of cryptocurrency. To understand what a blockchain wallet is, you must first understand the blockchain.
What Is The Blockchain?
The blockchain is what makes bitcoin work. The system of cryptocurrency would not exist without the transparency and robust security of the blockchain. It’s basically an open, distributed ledger that houses all the bitcoin transactions ever made in the history of the cryptocurrency. Because it is distributed across multiple computers, it cannot be altered retroactively without the alteration of every ledger, making it as good as impossible to hack into and change transactions. Every time a transaction takes place, it is added to the blockchain as a new block in the chain. The blockchain is the reason why there is no need for a middleman or central management system to manage all transactions, hence the reason it has contributed to making bitcoin so popular.
The technology of the blockchain is so intelligent, that mainstream banks and major businesses are all looking for ways to incorporate the technology into their own businesses. Watch this space because this could be the way of future banking across the globe.
What Is A Blockchain Wallet?
In order to make cryptocurrency transactions using the blockchain technology, you need to have a reference point for the transaction. This can come in the form of a blockchain wallet, more commonly referred to as a bitcoin wallet, but also known as a cryptocurrency wallet, mobile wallet, and many other names.
Before the name confuses you, it’s not an actual physical (or even digital) wallet that houses your money. It’s a reference point that is linked to an application that you can manage your transactions from. The blockchain wallet merely stores your private key, which is an integral part of your bitcoin transaction. Without a private key, you cannot buy, sell or trade your bitcoin. If someone were to get their hands on your private key, they would be able to do all the above on your behalf using your bitcoin.
Effectively speaking, you don’t actually store your bitcoin anywhere, but the key to accessing them is your private key, which is stored safely and securely in your blockchain wallet.
Different Types Of Blockchain Wallets
There are a number of different blockchain wallets to suit different needs and security requirements. The range is usually divided into the following wallet types:
Paper wallets are – as the name suggests – a printed record of the private key that can be stored offline in a place of your choosing. This is an option favored by people who are afraid of being hacked in the online space.
Mobile wallets are linked to a mobile application that allows you to manage transactions from your mobile phone, from any location.
Desktop wallets are also linked to an application, but one that’s desktop-based. This provides a limitation in terms of not being able to make or manage transactions on the move.
Hardware wallets are the height of blockchain wallet security. These are separate devices that can connect to your desktop via USB when transactions need to be made, but all the pertinent information sits within the device and cannot be hacked or removed.
There are many variations within these wallets. Some can even hold your altcoins for you.