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How a crypto wallet works: Important things to know

With all the crap around cryptocurrency, more people are entering the world of digital currency and crypto coins. However, before doing so, it is important to understand how the components of the cryptocurrency ecosystem function. One of the first things a user should consider when handling cryptocurrency is a crypto wallet. And it serves the purpose of a traditional wallet along with other crypto-specific functionalities. At a basal level, a cryptocurrency wallet has many similarities with a regular wallet as it helps you store cryptocurrency. In addition, it also allows users to send and receive digital currencies.

For a user to trade cryptocurrencies, it is necessary to have a wallet address to facilitate transactions. A cryptocurrency wallet is a software program that contains public and private keys that are unique to the owner of a particular wallet. Wallets allow you to interact with the blockchain, allowing you to not only make purchases and transactions but also monitor balances.

While the public key can be compared to a username, the private key can be compared to a password. Therefore, it is essential that users never reveal their private key. When a user sends another cryptocurrency, the receiver must be able to match the private key with the public key in order to unlock the funds and spend the coins. While there is no exchange of coins or currency, the transactions made appear on the transaction record on the blockchain. This, in turn, will result in a change in the balance of the cryptocurrency wallet of the sender and receiver.

Depending on the platform and device you are using, there are different types of wallets such as desktop wallets and mobile wallets and web wallets. Depending on the type of cryptocurrency, wallet, and transaction type, a transaction fee may be attached, the value of which is variable.

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