A digital currency wallet is a software program that interacts with blockchains allowing people to send and receive digital currency and monitor their balance. If you want to use Bitcoin or any other…
December 5, 2017
A digital currency wallet is a software program that interacts with blockchains allowing people to send and receive digital currency and monitor their balance. If you want to use Bitcoin or any other digital currency, you will need to have a digital wallet.
When a person sends you bitcoins or any other digital currency, they are essentially signing off ownership of the coins to your wallet’s address. To be able to spend those coins and unlock the funds, the private key stored in your wallet must match the public address the currency is assigned to.
If public and private keys match, the balance in your digital wallet will increase, and the senders will decrease accordingly. There is no actual exchange of real coins. The transaction is signified by a transaction record on the blockchain and a change in balance in your digital currency wallet.
What kind of wallet should I use?
There are two main categories of digital currency wallets, hot wallets and cold wallets. Hot wallets are wallets that are connected to the internet. These hot wallets run on the cloud and are accessible from any computing device in any location. While they are more convenient to access, these online wallets store your private keys online and are controlled by a third party which makes them more vulnerable to hacking attacks and theft.
Cold wallets on the other hand store a user’s private keys on a hardware device like a USB device or even on a piece of paper. These wallets tend to be more secure since private keys are stored offline and aren’t vulnerable to hacks. Coinsquare automatically gives you a wallet to keep track of your digital currency and stores over 95% of all user funds in cold wallets to make sure your money is safe from hacks.
Are digital currencies safe to use?
Digital currencies are incredibly safe when used and stored correctly, and networks like Bitcoin and Ethereum have inherent security features that make the networks incredibly resistant to hacks – far more safe than any bank or third party.