Bitcoin and Ethereum are becoming increasingly popular due to the many benefits they offer over traditional fiat currencies. You need to know how blockchain wallets work in order to use any of these blockchain-based cryptocurrencies. You must have been aware of online Bitcoin wallet for quite some while. Now let us see what is a Blockchain wallet.
What are the benefits of using a Blockchain wallet?
The traditional banking system is problematic for doing any transaction. Transactions can be slow, for instance. Another problem is that any transaction must go through a middleman, like a bank, which creates a single point of failure. In addition, there are issues with keeping track of all accounts and balances; data can be compromised, manipulated, or even corrupted across many systems where the accounts and balances are kept. By using blockchain wallets, these issues can be reduced or even eliminated.
What does Blockchain Wallet do?
Blockchain wallets are cryptocurrency wallets that allow users to manage different types of cryptocurrencies, such as Bitcoin or Ethereum. With a blockchain wallet, someone can easily exchange money. All transactions are cryptographically signed, so they are secure. Wallets can be accessed via web devices, including mobile ones, and the privacy and identity of the user are respected. A blockchain wallet, then, provides all the features necessary for the safe and secure transfer and exchange of funds between parties.
The process is very similar to sending or receiving payments via PayPal or any other current payment gateway, except you use cryptocurrencies instead. You can choose from Electrum, Blockchain.info, Jaxx, Mycelium, Samurai, and Bitcoin paper wallets as examples of blockchain wallets. Depending on the security you need and the needs of your business, there are many more options.
What is the Working Principle of Blockchain Wallets?
We’ll start by discussing what private and public keys are and how they apply to blockchain wallets. When you create a blockchain wallet, you are provided with both a public and private key associated with it. To illustrate, let’s look at an email address. You provide an email address to someone if you want to receive emails from them.
It does not mean that someone will be able to send you emails via your account if you share your email. The other person would need to know your password in order to do so. An electronic wallet works in a similar way, using a public key and a private key. Public keys are similar to email addresses; anyone can use them. You can receive funds from anyone by sharing the public key generated when your wallet is generated.
Private keys are highly confidential. It should not be hacked or disclosed to anyone, just like your password. This is the private key that you use to spend your cryptocurrencies like Bitcoin. Your account might be compromised if someone gets access to your private key, and all the cryptocurrency you have in your account might be lost.
The Features of a Blockchain Wallet
Knowing how Blockchain wallets work makes it necessary for you to know their features as well. The following are some of the main features of Blockchain wallets:
- Simple to use. You can use it like any other wallet or software to conduct your daily transactions.
- A highly secure system. Your private key is all you need to protect.
- Allows instant global transactions. Transactions are conducted without intermediaries.
- Low transaction costs. There are fewer fees associated with funding transfers than with traditional banks.
- Multi-currency transactions are supported. You can easily convert currencies with this.