Newcomers to Crypto generally face one big problem — since we use a lot of terminologies, many fundamental concepts are hard to understand. I’m going to attempt to simplify things with plain English explanations for many crypto concepts. Let’s start with Wallets.
Blockchain data can be freely read by anybody with the right tool, usually a web app written by a developer. But to make a change to blockchain data such as sending funds to someone or minting an NFT, you need to send a “transaction” to the blockchain.
A “transaction” is an action that changes blockchain data.
It has four primary components:
1. What will the transaction do? (ex: transfer funds)
2. Information needed for the transaction? (ex: amount, recipient)
3. transaction fees (aka “gas”)
4. Authorization for the transaction via a digital signature
A digital signature here isn’t just your scribbled signature in picture form. It specifically means using cryptographic techniques to create a sealed digital envelope that mathematically proves that “you” approved the transaction. The “you” in this case is not you, the person.
“You” really means someone or something in possession of a special piece of information called a “private key” The private key is a secret piece of information associated with your blockchain account that is used by a special tool to digitally sign the sealed transaction envelope.
The commonly used name for the special tool that is used to sign the sealed transaction envelope is… Wallet. In a nutshell, a crypto Wallet is a tool used to manage a list of accounts and their private keys that are necessary to sign blockchain transactions.
You’re probably thinking, “But wait. That doesn’t sound right. My crypto Wallet contains my BTC, EVOL, ETH, NFTs. Your definition of Wallet doesn’t mention how my crypto is stored in it. What gives?” That is the biggest misconception about crypto Wallets.
Repeat after me — crypto Wallets do NOT contain any crypto assets. No coins. No tokens. No NFTs. Crypto Wallets are a tool to manage your accounts and private keys — that’s it. Your crypto assets are ALWAYS data entries on the blockchain ledger, not in your crypto Wallet
This means you can use any number and type of crypto Wallet to transact for an account whose private key you know, and it will work satisfactorily. Your cryptocurrency — not in your Wallet your tokens/Coins — not in your Wallet Your NFTs — not in Your Wallet So where are they?
Your crypto assets are actually just blockchain data: Coins you own — an entry for your account in the ledger of the blockchain on which that Coin is a native cryptocurrency Tokens and NFTs you own — an entry for your account in the Smart Contract that issued the token.
Summary: A crypto Wallet is a tool used to manage blockchain accounts and associated private keys. Crypto assets are never in a Wallet, they always remain on the blockchain. You can use multiple Wallets for the same account — just the UI (User Interface) will be different, not the data.
Hope the information clears the idea of DigitalWallet.
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