In a regular bank account, money, or rather, its value, is stored. But in digital currency wallets, public and private cryptographic keys are kept. In fact, coins cannot be stored in a physical wallet. Because cryptocurrencies do not exist physically. A wallet address is something like a bank account number آرکاکوین
There is nothing wrong if you give your bank account number to someone else, because they need it to transfer money. In the world of digital currencies, if someone wants to send you your coins, you can simply give them your wallet address and receive your coins. Just like bank accounts, no two wallet addresses are the same. As a result, no one but you can receive your money. Also, the number of addresses in your wallet is unlimited. That means you can create as many addresses as you want for your wallet.
For example (in the case of Bitcoin) here is a wallet address believed to belong to Bitcoin creator Satoshi Nakamoto:
1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa
As you can see, this address is a complex combination of numbers and upper and lower case letters. Since most blockchains are transparent, it is easy to see how much money a particular wallet has and what financial transactions its owner has made in the past. However, the address of a digital currency wallet does not reveal the true identity of its owner.
How are public and private keys associated with a wallet address?
Most people think of a public key as something like a public wallet address. But in fact, each person's wallet address has a unique private and public key. The private key allows you to access the funds associated with your crypto wallet address. Let's take an example to understand this better. Imagine you want to transfer money from your bank account to someone else's bank account, in this case, you need to enter your personal password first. No one else has access to this password, not even the bank. Otherwise, if someone finds out, they can transfer money from your bank account! The private key does exactly the same thing and is specifically linked to your personal wallet address.
What is a public key?
The public key is mathematically related to your wallet address! However, it is considered a "hash version". The hash function allows you to encode a sequence of letters/numbers called "input" into a new set of letters/numbers called "output". In fact, this opens up a layer of security and ensures that your wallet is unhackable.
for example:
An example of a private key:
03bf350d2821375158a608b51e3e898e507fe47f2d2e8c774de4a9a7edecf74eda
An example of a public key:
99b1ebcfc11a13df5161aba8160460fe1601d541
Maybe at first glance, these two keys seem completely different, but software technology recognizes that these two keys are specifically related to each other. The connection between the keys proves that you own the coins and allows you to transfer your money whenever you want! In fact, there is no need to learn about the technology and the adventures that happen in the background. Cryptocurrency wallet transactions are similar to using Gmail and Hotmail. The software does all the work for you.
Types of digital currency wallets
Currently, there are various types of wallets available to the public. The wallet you choose depends on your personal needs. Basically, different wallets offer different features such as security, user-friendly behavior or even more convenience.
The most popular types of digital currency wallets are:
Digital currency wallet for PC
Desktop wallets must be downloaded to a specific laptop or computer and are only accessible from that specific device. Overall, these types of wallets offer a good combination of security and convenience. However, remember that if a hacker gains the ability to remotely control your device, they can easily gain access to your wallet.
Digital currency wallet for mobile
A mobile wallet is very similar to a desktop wallet. Because this type of wallet is also downloaded directly to your device. You usually access your cryptocurrency wallet by downloading an application on your mobile phone. Such access allows you to spend your coins at a store by scanning a QR code.
Online digital currency wallet
A web wallet gives you the best level of convenience when sending coins to others. However, this wallet has the lowest level of security. Because usually the producer of that wallet has full control over the system. An example of such a wallet is storing coins in a cryptocurrency exchange. This exchange stores your coins on its central server. If this server is hacked, the hacker can access all your money. It is better to keep only a small number of your coins on the web wallet.
Paper digital currency wallet
Paper wallets are one of the least valuable crypto wallets. All you have to do is print out your public and private keys on a piece of paper and you can easily increase the level of security.
Paper digital currency wallet
Paper wallets are one of the least valuable crypto wallets. All you need to do is to print your public and private keys on a piece of paper and with this you can easily keep your money safe. Because in this method, the keys are not connected to any server. As a result, there is no way to access the wallet other than having that paper in your possession. When you need to transfer money, you can simply enter the keys into an app or web wallet, or even easier, just scan the printed QR code.
Hardware digital currency wallet
In terms of security, no wallet is better than a hardware wallet. A hardware wallet is a physical device whose sole purpose is to store your public and private keys. This device connects to the Internet only if you need to transfer money. When transferring, you must enter your personal PIN directly into the device. This makes it almost impossible for hackers to access your keys.
Custodial and non-custodial digital currency wallet
Blockchain and digital currency transactions that are based on blockchain have many advantages, and this has caused many people and organizations to be attracted to this technology. But this technology is not always suitable for all people, for example, if you have a large investment in the Trust Wallet or similar wallets and you lose your mobile phone for some reason, your entire investment in the wallet The money will be lost and you will not be able to recover it by referring to any organization or platform.
On the other hand, it is possible that a person with a lot of assets of digital currencies, who is the only one who knows about the terms of wallet recovery, may die suddenly, in such a situation, the people close to that person will not have any share of his assets, and in fact, these digital currencies will probably last until They will remain intact forever.
This problem has happened many times before, so that it is said that so far, about 3 million bitcoin units have been removed from the reach of the original owners, and this can be due to the death of a person or the loss of recovery phrases and wallet login password. where the bitcoins were kept.
Despite the described problems, the custodial wallet was created, in these types of wallets, you represent a person or, more precisely, an institution that provides custodial services for digital currency, as a proxy for your assets. to protect It is obvious that in this case, the private keys are not only in your possession, but the officials of the custody wallet institution also have access to it, and on the other hand, you can access your assets at any time you want and no longer worry about forgetting the password. To the wallet, you will not have recovery phrases, etc.
On the other hand, non-custodial wallets, which we are more familiar with, are wallets whose private keys are only available to the owner of the asset, and transactions can only be made with private keys that are only available to the main owner of the wallet. is done By choosing non-custodial wallets, if your mobile is stolen or you forget the recovery phrases, you will lose your assets forever.
Are custodial wallets safe?
Custodial wallets store people's assets online, and because thieves are sure they contain valuable data, they spend a lot of time and energy hacking these wallets. Thieves probably won't spend much energy on hacking a single person's assets in a non-custodial wallet like TrustVault.
Of course, it cannot be said that custodial or trust wallets are not useful for any person, but people who intend to use these wallets should carefully validate the wallet before choosing. If you choose a custodial wallet with high security, you can be sure that you always have access to your assets, and this solves one of the drawbacks of blockchain (according to some people, of course).
What points should be considered when choosing a custodial wallet?
Previously, we explained the concepts of custody and non-custody digital currency wallets to you, if you also intend to use custody wallets for some reason, you should be aware that due to the third party's control over the assets, it is necessary that the custody wallet Choose carefully. In the following, we will list the features that you should pay attention to when choosing a custody wallet:
How to store private keys
Insuring the capitalist's assets
Support for the desired digital currency
Services provided by Wallet
Experience other users and ensure compliance with the rules
Also, due to existing restrictions, make sure that you as an Iranian person will not face problems in the future
Some examples of custody wallets
- blockchain.com (com)
- Binance Custody
- BitGo
Free Wallet
Some examples of non-custodial wallets
- Trust Wallet
- Metamask
- Trezor
- Exodus
- Ledger