What is a bitcoin wallet and how it works

5 min read

Bitcoin Wallet: how to save your bitcoins and other cryptocurrencies

If you are a cryptocurrencies newbie and have just entered into this world, you will surely have asked yourself this question: Once I have made a cryptocurrencies purchase, how and where can I store my crypto?

Well, today we will try to answer your question and explain what is a bitcoin wallet and how it works.

What is a bitcoins – cryptocurrencies wallet?

Whenever we want to buy bitcoin or other cryptocurrencies, in the case of digital money (not physical), we will be asked for the address of the wallet in which we want to receive and store them.

Therefore, a wallet (digital wallet), serves to store, send and receive bitcoin or other cryptocurrencies safely.*

* We remember that, after having validated a cryptocurrency transaction, this is reflected and stored in the blockchain and the wallet only stores and gives access to the information about that transaction, not the currency itself. This guarantees that your crypto are stored in the blockchain and only belong to you.

Security is guaranteed by two features that each digital wallet has:

  1. A public key: it is a public code that, in the case of the wallet, represents your public address of the wallet, necessary to share it with other users who want to send you cryptocurrencies. It is a hard-to-memorize character string that is also reflected in a QR code, so you can easily share it with other users. The same key (even if it is not nominative) communicates the amount of cryptocurrencies stored in your wallet. This key is very similar to a e-mail account or a user account. A private key corresponds to each public key.
  2. A private key : the private key is a code formed by a very long string of characters (and therefore very secure) and has the same function as the password of an email or any private account.

Example of Public and Private Key generated on Bitaddress.org

As already mentioned, the private key is associated with a public address and is provided when a new wallet is opened and grants us access and, therefore, the use of the same wallet.

Then, when you need to send cryptocurrency to another person’s wallet, you will need your public address (public key) and your private key in order to access your wallet and your funds.

When a transaction is executing in the blockchain, a digital signature will be created and the transaction will be processed with the private key.

It is very important that you keep your private key secret and that you keep it in a safe place. If you lose your private key, you will also lose access to your wallet and, therefore, your cryptocurrencies.

As we have seen, the public and private key are two very important elements in a wallet, since they  are the bedrock of each blockchain network that guarantee the security of the system.

Now that we have clarified what is a digital wallets, we would also like to explain what types of wallet are available, so you can understand the differences between them and choose the one you consider most safe to store your crypto funds.

For this reason we leave you this interesting article on : types of Wallet to use to store cryptocurrencies.

Do not miss it! 😉