A Cryptocurrency wallet is just a simple device, virtual medium, application or a service that stores the private and public keys for cryptocoin transactions. On the other hand, it is also known as a purse, briefcase or wallet. Along with the basic function of storage of the keys, most of the time, a Cryptocurrency wallet also offers the additional functionality of signing and encrypting information. Some additional features may also be provided by the wallet software. Thus, it can be termed as a wallet for privacy, not sharing sensitive information with anyone.
To understand how a wallet for Bitcoins works, it is important to know how conventional wallets work. You may have seen some public applications where you are required to use a password and public key to make some basic transactions. In this case, two things are happened: one is that you are not actually making transactions on your own behalf but rather, you are allowing a third party to sign or encrypt your public key. Your private key remains completely under your control.
However, there is another type of traditional wallet, namely the desktop wallet. It is operated by the user with the use of specialized hardware like the USB drive or the card readers. As a rule of thumb, you can say that the desktop wallets are more secure as compared to the portable ones. This is because the private and public keys cannot be directly accessed by anybody else apart from the owner. Besides this, the process of making, receiving and making payments are entirely controlled by the user. The benefit here lies in the fact that the wallet for Bitcoins cannot be easily hacked.
Let us go back to the scenario mentioned above – you are carrying with you a wallet containing crucial data. Naturally, you would not want any third party to have access to it. This is where the offline wallet proves to be beneficial. An offline wallet, in this case, is an extremely long series of numbers or words which are used to generate the private key and the corresponding index in your computer. All the crucial information regarding your private key and the corresponding index can only be known to you and nobody else apart from you.
But the question still stands, whether such a wallet can be called a Blockchain wallet. Is it possible for a hacker to break into such a wallet and get hold of all the private keys as well as the corresponding indexes? Well, the answer is yes. However, such an attack will be executed using the oldest technique known till date. It is known as the brute force attack. In other words, if you have a large wallet you may not be able to spend all your money in a single transaction because it will consume a lot of time.
This is the reason why people who prefer to use paper wallets prefer to use something like the bitcoin wallet. These paper wallets are actually virtual offline wallets without any password required to make transactions. While these do not posses the same facilities that the bitcoin wallet possesses, they are nevertheless very popular and widely used. It is for this reason that if you choose to go with something other than the paper wallet, it is essential that you go in for a high security wallet.
The best such wallet that I would like to name in this article is the mycelium wallet. This mycelium wallet is an android only application. But it has all the facilities that you find in a normal android wallet like backing up of your balance and the private keys. Unlike the bitcoin wallet, mycelium does not store any bitcoins on its own but rather it connects to an external website through Bluetooth.
It is my understanding that this feature was present in the past in the old Forex systems but the implementation was either very expensive or did not work properly. The long-term storage facilities that were present in the previous systems have now been superseded by the newer ones. There are many other features present in this wallet like the ability to send and receive multiple transactions simultaneously which have made it very attractive. In short, it is now the choice of many traders to store their trades in the long-term storage facilities of these currencies rather than the newer technologies that have come up in the market. If you are planning to go ahead with the new technologies, I would suggest that you go in for a long-term storage facility for your trades rather than the newer currencies as it will protect you from the risks associated with the newer technologies.