FAQ: Wallet Archives - CryptoCurrency Complete Guide

Where is cryptocurrency stored?

matt peperman — Fri, 11 Jan 2019 20:59:41 +0000

Despite the common misconception, currency is not stored in cryptocurrency wallets. Cryptocurrencies are stored in blockchain account ledgers.

Most ledgers are public (anyone can view them), but some are private. The ledgers are duplicated on 1000s of computer systems distributed around the world. This replication is done to ensure that the ledger stays truthful. Most of the computer systems that participate in hosting the ledgers are owned by cryptocurrency miners.

Unlike traditional fiat currency (like the US Dollar), cryptocurrencies have no physical manifestation (you can’t actually touch them). They only exist in electronic (or “virtual”) form.

Although they are not directly stored in wallets, you do need a wallet to use your currency. These wallets contain unique code numbers, called private keys. It is the private keys that only you and your wallet know that prove your ownership of your currency. The wallet with proper keys allows owners of the currency to transfer or spend their currency. They do this by sending “spend/send” messages to the globally distributed account ledger.

Via the mathematical miracle of private key cryptography no one can steal your funds without knowing your unique special private key.

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Are cryptocurrency wallets safe?

junryan — Mon, 08 Oct 2018 06:57:43 +0000

The safety of cryptocurrency wallets is dependent on many factors, but the most important factors are the wallet type that is chosen, and how well the wallet user follows standard security precautions for that particular wallet. Hardware wallets are considered one of the safest kinds of wallets. Read all about cryptocurrency wallets here.

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How cryptocurrency wallets work

junryan — Mon, 08 Oct 2018 06:18:16 +0000

Contrary to the common expectations, cryptocurrency wallets don’t store cryptocurrency. Instead, these digital wallets store only the owner’s secret codes (private and public keys) which are used to unlock their currency so that it can be spent. All cryptocurrency is “stored” (recorded) in the globally distributed blockchain ledger, not in the wallet. The wallet is a combination of software, memory, and, in some cases, dedicated hardware. The wallet creates a message which defines the owners desire to spend money. Then the wallet encrypts that message using the owners private key(s) and sends it to miners who will validate it and make it a permanent part of the blockchain. Once that is done then the transaction is complete and the money is spent. The wallet is not used for the receive side of a transaction, only to send.

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