PURPOSE OF BITCOIN WALLETS

PURPOSE OF BITCOIN WALLETS

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A Bitcoin wallet is a device or program that is used to transmit and receive Bitcoins on a practical level. For those unfamiliar with Bitcoin and cryptocurrency, the phrase wallet can be perplexing. A literal wallet is for storing tangible currency; however, a Bitcoin wallet isfor storing Bitcoins. How is this going to work?

A debit card, for example, is something most individuals already have in their actual wallets. Although the debit card in your wallet is not money, it does provide you with access to it.

This is comparable to how a Digital wallet works, with the exception that, unlike a debit card, which is managed by a centralized institution (a bank), Bitcoin is not controlled by anybody or any organization. Because of this distinction, crypto wallets must operate differently than bank accounts.

Using the debit card metaphor from earlier, a Bitcoin wallet can have several “accounts,” or sub-wallets. This sub-wallet can be compared to a debit card in terms of functionality. Debit cards, for example, have data connected with them, such as a customer id and a password. Information is associated with each Bitcoin “account” within a wallet. The official Bitcoin address and the private key are the two most important pieces of information for our purposes. The public address is similar to the account number on a debit card. The private key, on the other hand, functions similarly to the password on a debit card in that it gives access to the Bitcoin connected with that public Bitcoin address. A 256-bit secret number is a private key.

The management of the private key is one of the most key aspects of a wallet. Users practically never handle private keys directly. A recovery phrase, secret passphrase, or seed phrase is a way to write down this private key in a much more consumer-accessible style in wallets. A recovery phrase is a set of words, usually between 12 and 24, that allows you to reassemble your crypto wallet and access your assets even if it is lost or destroyed.

Because the recovery phrase is similar to a private key, you must never give it to anyone or save it in clear text on your computer or online.

The recovery phrase is an upgrade over the private key, but it still has a lot of room for development. Because you shouldn’t save your recovery phrase in clear text (non-encrypted form) on your computer, most individuals find that writing it down on paper is the best alternative. This causes issues since storing a piece of paper safely can be difficult. Furthermore, if you’re using a multi-coin wallet, you’ll have a different recovery phrase for each blockchain supported by your wallet. Keeping track of all those recovery words on paper becomes tedious quickly.

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