Types of Digital Wallets

To understand the classification of “blockchain digital wallets” (hereinafter referred to as wallets), we must first understand a few concepts first. The wallet generally contains the following: public key, private key, mnemonic, keystore, password; the content here may be a bit confusing but in essence, the wallet and the key correspond to each other. Your unique key is supposedly able to open your own wallet on the Internet, but in order to avoid data leakage during network transmission, cryptographers use asymmetric encryption technology and invented the public key and private key. The public key is used for transmission and the private key is used for decryption. We can think of the public key as the bank card number and the private key as the bank password.

Private key = keystore + password. The private key is composed of fifty or sixty digits and case-sensitive letters. In order to facilitate digital asset transactions, we can easily transfer digital assets with a simple password and keystore. A mnemonic is an encrypted private key, which is basically a private key. It was invented to facilitate the export of a keystore.

There are many ways to categorize wallets, such as:

(1) on-chain

Send digital currency to a wallet address, and this transaction is broadcast across the network, confirmed, and packaged into blocks. This happens on the chain and is called on-chain transaction; the on-chain wallet needs to keep the private key by itself.

(2) off-chain

Relative to on-chain transactions are off-chain transactions. Usually, transactions through exchanges are off-chain, and do not have a private key. The private key is on the exchange and is hosted by the exchange. Therefore, the exchange’s wallet is also a centralized wallet.

(3) Cold wallet

Cold is offline and disconnected, that is, the location where the private key is stored cannot be accessed by the network. Examples include paper wallets, brain wallets, hardware wallets, and more.

(4) Hot wallet

Hot is connected, that is, the private key is stored in a location that can be accessed by the network. For example, hot wallets are stored on exchanges, online wallet websites, and mobile app wallets. Generally speaking, cold wallets are more secure and hot wallets are more convenient to use.

(5) Full node wallet

In addition to storing the private key, the full node wallet also holds data for all blocks, the most famous being bitcoin-core.

(6) Light wallet

It does not have to save the data of all blocks, only the data related to itself. Can basically achieve decentralization.

(7) Centralized wallet

Wallets on exchanges, and safes like those provided by OKLink.

When using a wallet, everyone must learn more and research more. Because the blockchain is anonymous, real-name authentication is not required to use various wallets. Although you can see the address of the transaction transfer, you do not know who the address user is. Moreover, the information on the blockchain is irreversible. In case you are careful to mistype the coin, you will not be able to find it. We put the coins in the wallet, where did we put them? Is it right in the wallet?

The decentralized blockchain currency wallet we use is actually just a blockchain software. Your coin is not stored in the wallet company or on your mobile device. The coin is still in the address of the blockchain network. The wallet just shows you the various codes of the blockchain through the server, establishes a channel, and sends your various operation instructions to the blockchain. Therefore, blockchain wallets do not exist in which your bank freezes your account or your company freezes your account. As long as you lose your private key, you will no longer be able to open your wallet and lose the currency in your wallet. From this perspective, in fact, the security of the wallet has a lot to do with your private key storage, because the wallet service provider will not save your private key and will not put it on the server; even if there is a problem with the wallet, you cannot log in , Or version updates, or being hacked, will not affect your assets. From this point of view, the private key is the most important thing to keep cryptocurrency.

Disruption does not happen overnight. Blockchain technology is still in the early stages of development, and many practical levels of technology have not yet been perfected. The application of blockchain wallets also has to wait until the technology is mature, which cannot happen in a day or two.

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