You may have heard of cryptocurrency and wondered what it may be about and how to participate. Here you will learn about cryptos, blockchain, wallets, keys, transactions, and wallet storage.
Cryptocurrencies are international digital assets that you may own, invest in, buy, sell, and exchange. Cryptos may increase or decrease in value because of the crypto’s balance of supply and demand. You may use cryptos to pay for services or items.
Cryptos may use a form of a decentralized internet-based distributed database system. This system is known as blockchain network technology. Blockchain keeps records of purchases and sales of cryptos in a distributed digital ledger of transactions.
Each crypto may have its own blockchain. Blockchain technology spreads all transactions across block files and connects the blocks in a chain using cryptography.
All transactions may be visible to the public using corresponding blockchain explorers. Blockchain digital ledgers do not include your name, but your transaction amounts and with whom you transacted may trace back to you using your wallet address and publicly available blockchains.
You will need one or more digital wallets to participate in crypto transactions. A crypto wallet is software that securely interfaces with a compatible blockchain. A wallet enables you to make crypto transactions and see your crypto balances. You may use one wallet for each type of crypto you own or an ERC-20 compatible multi-wallet to transact with multiple cryptos in one wallet.
The blockchain digital ledger holds an up-to-date account balance for each wallet address. If you send cryptos to a wallet address that does not support that crypto type, the cryptos may become irretrievable.
You may view your digital ledger of transactions and balances within your wallet. Your wallet stores your private key, public key, and wallet address as a series of case-sensitive alphanumeric characters.
Your wallet address is a one-way encryption or hash of your public key. You provide your wallet address to others to receive cryptos in transactions.
Your private and public keys have a mathematical association. Your wallet derives your public key from your private key.
Your public key encrypts transactions sent to your wallet address. Your private key decrypts transactions sent to your wallet address.
Your private key is used to unlock your wallet and start transactions. Your private key additionally serves as your digital signature and proves you own a corresponding wallet.
You must keep your private key confidential. Whoever gains access to your private key may impersonate you and take ownership of your wallet and cryptos.
You may view the state of your transactions as they are being settled on corresponding blockchain explorer websites by your wallet address or transaction number. Transactions are non-reversible, unalterable, validated, time-stamped, permanently kept, and constantly added.
You may set up your crypto account using an app, a web-based portal accessible on internet-connected systems, or designate a desktop or laptop computer onto which you download your crypto account software.
To keep your wallet safe, you may keep it physically disconnected from the internet using a hardware wallet, known as cold storage, a physical device that stores your private keys. You insert the device into your computer when ready to make crypto transactions.