What is a blockchain wallet?
If you want to leverage the blockchain technology, you should be familiar with what a blockchain wallet is and how it works. According to Statista the number of blockchain wallets has reached over 25 million users at the end of June 2018.
As I’m writing this post the demand for cryptocurrency wallets is still growing and has reached the number of 27,628,301 users.
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What is a blockchain wallet?
Blockchain wallet is a computer program that allows to monitor and conduct cryptocurrency. Don’t think of it as a physical item that stores your currency like a regular wallet does.
In crypto wallets transactions are recorded on the blockchain. It can be compared to how an email account works. You might say that you can store and receive cryptocurrencies like emails. If someone sends you cryptocurrency, it means it is assigned to the address of your blockchain wallet but recorded in a distributed ledger.
How does a blockchain wallet work?
To understand it, you have to be familiar with the blockchain concept. The cryptocurrency of any kind would not exist without transparent and distributed ledger that makes all the transactions possible and stores them without a possibility of alteration.
Blockchain is an electronic ledger (digital database) which keeps an unchangeable record of data operations. These operations are grouped in “blocks”.
The data is decentralized and stored across the network. Each and every block is linked to the previous one and time-stamped. These links create “chains”.
Every operation on the data is recorded and confirmed anonymously in a form of a record of events that is shared between many parties. Blockchain transactions are based on asymmetric cryptography which uses two types of keys:
- a private key
- and a public key
These keys are non-identical pairs of large numbers, from which one key can be shared with anyone and the other is kept secret.
You need a place to securely store your records of transactions along with the private key that enables your identification in distributed network. Your private key acts as a personal digital signature and if a record is altered, the signature will become invalid. This brings us to the concept how blockchain wallets work.
When the transaction is being processed your private key in your wallet must match the public key that the currency is assigned to. When both the keys match, the ownership of the currency is signed off to your wallet’s address. The transaction is recorded on a blockchain network and the balance appears in your wallet.
What are the types of blockchain wallets?
There are plenty of options for cryptocurrency wallets, varying from: desktop, web, mobile, hardware and even paper wallets. They differ in terms of security and user preferences.
The main advantages of blockchain are its trust and distribution. However, it can be a double-ended sword. If you lose your email password it’s not such a big deal comparing to when you lose your private key.
Desktop wallet
Desktop wallet is installed on your PC or laptop. This option is usually safer than web wallets that run in the cloud. This type of wallet is the best choice if you don’t plan to access your wallet anywhere, all the time. However you should make sure your machine has a proper antivirus software installed and that you update your blockchain status by connecting to the network when needed.
Mobile wallet
This is light versions of wallets, suitable to download and install on a smartphone or tablet. It can work seamlessly, however it depends on other nodes in the process of verification of transactions. On the contrary full wallet versions verify transactions themselves.
Hardware wallets
Cold storage available in this option is the most secure way of storing data. Hardware blockchain wallets can be disconnected from the internet and can sign transactions without being online, but they are not a good choice when you want to use them frequently or on the go.
How to choose the best blockchain wallet for your needs?
If you’re an individual user you can choose a blockchain wallet based on your preferences on how often you’d like to interact with blockchain protocols and what safety level fits your individual needs.
Businesses are on a way to take blockchain way beyond bitcoin. Every transaction that takes place on a blockchain, whether it’s just mining bitcoins or executing a type of smart contract, are visible and managed in a blockchain wallet.
As with every off-the-shelf product, sometimes you find that nothing quite fits, especially if you want to accelerate your users’ experience. If you’re representing a business side you might need a dedicated wallet for your blockchain project. Custom made blockchain wallet has plenty of benefits, among others:
- Providing a seamless experience for end-users or customers
- Avoiding fees present in existing blockchain wallets
- Meeting the highest safety standards
Just very recently this collectible crypto game Blockchain Cuties released its first crypto wallet. The game’s own wallet is designed for users who are new to the market or those who do not want to install additional browser extensions to play.
More and more businesses are looking for new ways to communicate with customers and make their journey even more seamless and personalised. This is no different with blockchain projects.
Do you want to design a blockchain wallet tailored to your business needs and leverage the benefits of the decentralised ledger? We can help. Read more about the crypto projects we have successfully delivered here. Or check out kovari — an online crypto wallet we’ve developed and launched.
