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What is Blockchain Wallet?

A blockchain wallet is a software that enables sending and receiving cryptocurrencies such as Bitcoin, Ethereum, etc. It stores the record of transactions and also public and private keys which are used to perform transactions. 

Public-Private keys are always present in pairs. A traditional wallet stores the currency. While a blockchain wallet never stores any cryptocurrencies. It contains the record of transactions performed by the users. It also stores the public and private keys of the user.

What is Blockchain Wallet?

A blockchain wallet is a cryptocurrency wallet that is used to manage cryptocurrencies like Bitcoin and Ethereum. It helps to exchange funds easily and the transactions are more secure as they are cryptographically signed. The privacy and the identity of users are maintained and it provides all the features that are necessary for secure and safe transfers and exchange of cryptocurrencies. 

Features Of Blockchain Wallet:

Why Use Blockchain Wallet?

Traditional wallets have many drawbacks due to which blockchain wallets have an edge over traditional wallets. Below are some of the reasons for using blockchain wallets:

How Do Blockchain Wallets Work?

The blockchain wallet stores the private keys and public keys for a transaction. The wallet enables users to sell, and purchase goods using cryptocurrencies. Let’s understand how a blockchain wallet actually works and what are private and public keys in a blockchain wallet.

Let’s understand this with the concept of the email address.

Types of Blockchain Wallets

The following are the different types of blockchain wallets:

1. Hot Storage: Hot storage refers to the type of storage that is connected to the Internet. Hot storage, being connected to the Internet, allows the user easy and quick access to funds. It is helpful in daily transactions. But, it also has some disadvantages. It is more vulnerable to hacking and cybercrime. If the private key is lost then there is no longer access to coins. Also, if the private key is stolen by someone then it causes to loss of coins. The different types of hot storage wallets are Online(Cloud), Desktop, and Mobile wallets.

2. Cold Storage: Cold storage refers to the type of storage that is not connected to the Internet. It is also known as offline storage. Cold storage provides a higher level of security than hot storage. It is useful for long-term storage, unlike hot wallets. However, a higher level of security is provided at the cost of convenience. It is not ideal for daily transactions. Although it is secure, it is vulnerable to external damage and loss. The different types of cold storage wallets are hardware wallets and paper wallets.

3. Multi-signature wallet: Multi-signature wallets are those wallets that require more than one private key to execute a transaction. The number of private keys required depends upon the initial configuration of that wallet. It can either be 2-of-3 keys, or 3-of-5 keys. It contains two main advantages:

4. Multi-currency wallet: Multi-currency wallets, as the name suggests, are those types of wallets that allow the user to store more than one cryptocurrency in the same wallet. This means that it can perform transactions that require Bitcoin, Ethereum, etc. using the same wallet. Also, an additional feature that allows converting one cryptocurrency to another is desirable and can be achieved through ShapeShift integration in your wallet. Example: Exodus 

Criteria To Choose Blockchain Wallet

 It depends on the preference and usage type. There is a tradeoff between convenience and security. 

Benefits of Blockchain Wallets

The following are some of the benefits of blockchain wallets:

Challenges of Using Blockchain Wallets

There are many advantages of blockchain wallets over traditional bank accounts but there are some challenges also in using blockchain wallets:

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