[Eden Diary_TD] About the cryptocurrency wallet
About the cryptocurrency wallet
by Brian Park
In this blog diary, I’m going to briefly summarize the different types of wallets that we are using in the cryptocurrency market and the definition of its basic function. At last, I will introduce the E-Wallet EdenChain has been preparing.
What is a wallet address?
Compared to an email account, a wallet address is the same as an email address. We can send coins to someone else’s wallet address through wallet accounts.
What is a private key?
This private key is a kind of password. Keep in mind that you must have a private key associated with the password to transfer the coins. If you enter target addresses and coin amounts in your wallet, the wallet converts the private key to a unique signature.
This signature can only be made if you have the correct private key. Once the signature is created, the wallet signs the transaction and broadcasts the transaction information to the network. This allows everyone to verify that the transaction has taken place. In other words, you cannot send a coin without this private key. If you lose your encrypted wallet, you will need to restore it using the information you need for back-ups such as the public key, private key, and backup phrase.
Types of cryptocurrency wallets
There are three types of wallets: software wallets, hardware wallets, and paper wallets. The advantages and disadvantages of each type are as follows:
1. Software Wallet
There are two types of software wallets: “Client Wallet” installed on PC or Mobile and “Web Wallet” using an Internet browser.
1.1 Client Wallet (Installation type)
There are two types of client wallets, full node client wallet, and thin client wallet.
1.1.1 Full Node Client Wallet
To run a full node client wallet, you must download the entire blockchain to your PC. The blockchain of the coin can be directly supported by determining the authenticity of the transaction through the full node.
Advantages: Provided by the development of the corresponding cryptocurrency, the wallet ensures a rich and stable environment of security.
Disadvantages: It can take up several gigabytes of storage, and it takes a lot of time to “sync”.
ex. Bitcoin Core and Ethereum Mist
1.1.2 Thin Client Wallet (Installation type)
The advantage of the thin client wallet is that the synchronization is relatively fast because it uses the blockchain stored online. The disadvantage is that when you are logged in to the Internet, you do not isolate your private key.
ex. Mycelium
1.2 Web Wallet
There are two types of web wallets.
Advantages: It is easy to create without taking up any storage capacity and synchronization time.
Disadvantages: When a website is down or hacked, access to the coin is restricted.
1.2.1 Thin Client Web Wallet
It is accessed through an Internet browser but is installed separately through a plug-in method.
ex: myetherwallet CX –https://metamask.io/
1.2.2 (Just) Web Wallet
Available only through an Internet browser.
ex. Ethereum –https://wwww.myetherwallet.com
2. Hardware Wallet
Advantages: It is a real device like USB and keeps the password safe. Access to the coin can only be done via hardware. It does not utilize any computer capacity or synchronization time.
Disadvantages: There is no way to access coins without USB hardware. Loss of the hardware wallet will limit access to coins. However, hardware wallet companies offer a way to recover coins through the seed phrases and PIN code.
ex. Ledger Nano S, Trezor
3. Paper Wallet
Advantages: It is the safest way to store coins, and can be made by printing paper wallets on most virtual wallets.
Disadvantages: If you lose the printed paper, you lose the coin. Some people keep this paper in a bank, and when compared to other wallets, it is a little bit cumbersome to get a coin out.
4. Others (Cryptocurrency Exchange Wallet)
Using the DEX, it is easy to create wallets of various coins and is ideal for traders when using an exchange. If the exchange is closed or hacked, access to the coin may be blocked or the coin may be lost forever. Unlike other wallets, it does not have access to private keys, and it is not recommended to keep coins on exchanges for long periods of time.
The difference between Hot Wallet and Cold Wallet
Hot Wallet: An online wallet for cryptocurrency transactions
ex. password exchange (wallet server connected to the Internet), web wallet
Cold Wallet: For safe storage of cryptocurrency, it is used as a separate hardware device such as USB without need for online access.
ex. Hardware Wallet, Paper Wallet
Some of the wallets support several types of coins, and some also support hybrid wallets. In addition, the terms of use and wallets themselves are constantly changed due to the continuous technological development of cryptocurrency.
The future E-Wallet is equivalent to a client wallet. The team is working hard to improve security and transaction processing speed. In addition, it will improve the convenience and user accessibility with a revised UI / UX. Still, it is too early to discuss the details of the future E-Wallet, however, it will be introduced in the near future. I am confident the improved E-Wallet will make use of Eden’s unique identity.
