Your Weekly Cryptocabulary: Wallet
When I say wallet, what do you think of? Probably something like this?
...or maybe you're thinking of something a little bit bigger?
Hey, who am I to judge what you use to carry your valuables in, right?! The point IS, it's a container of value.
Most of us are old enough to know that this used to be what EVERYONE carried in there wallets...(well, only up to $9,999 at least, legally that is...but I digress...)
Of course, unless you didn't have it, and in that case, it was receipts and a handful of those little buy-one-get-one coupons from your local burger joint...just on the off chance you ran into a little mullah, you know what I'm sayin'! Whoop, whoop payday!
Then the next generation traded paper for plastic...credit cards and debit cards!
And the everything went sideways after that! Your local bank became the real wallet for all that lovely green paper, and they gave you a pretty plastic card with some numbers on it, patted you on the head, and sent you on your way saying, "No worries, your money is safe with us, and you can get it whenever you want. As a matter of fact, don't even bother with that dirty green paper...who knows what's on it, right? Yuck! Just use that magic little card there. They'll take it...oh, just about anywhere!"
And so the story goes, until...
Blockchain arrives! Duh, duh, duh, DUH! ...but more specifically cryptocurrency. And once again we were able to put real value back in our wallets. Of course, crypto wallets don't look the same any more, and you aren't really putting "money" on them, but they are wallets nonetheless, and they come in Cold (hardware) and Hot (digital) wallet styles--each one having its unique feel and interface.
Where does your wallet live?
Instead of paper or plastic, your wallet has an address. That's right. A alpha-numeric address, also know as a public key. This address tells the rest of world (via the blockchain ledger) that you own a certain quantity of a particular coin. More specifically, the address owns the coin, and you own the address. But unlike physical address, your wallet's address has no personal private identification connected to it. So even though the rest of the world can see the address and know its transactional history (buying, sending, receiving, trading), it cannot connect that address to you! Transparent and yet...anonymous. Brilliant!
Each coin has its own distinct address format. For example, Ethereum and all ERC20 tokens addresses start with 0x (zero-x), includes numbers, upper-case and lower-case letters, and are 42 characters long. Bitcoin address starts with the number 1 or 3. They also include numbers, upper-case and lower-case letters, and are usually have 32-34 characters. Here are a couple of wallet address examples:
Bitcoin – 1GjDMGrvdw15uTRbBo7A2ExCxL8GepkM81
Ethereum – 0xf253fc2ca37d078436d07fb75e5a76f649892876
(NOTE: these are NOT mine nor are they real, so don't try sending anything to them. It'd be like dropping your car keys into the Mariana Trench. You're not getting it back.)
So the three main takes aways for your public address or key is:
- It is used to receive and send coins or tokens
- It identifies your wallet account on the network
- It can be search for in the blockchain ledger
Is it secret?! Is it safe?
The other important part of your hardware and digital wallet is the private key. This is the encrypted side of things. It is not the password you used to log into your wallet. Rather, it is the encrypted code written into the firmware of the hardware wallet or the software of your digital software. Because it's a very large key, we use what is called mnemonic code, which is a system of patterns or words to help in remembering something more complex. This is what your 12 or 24 word seed phrase is. If you want to get into the weeds more, you can learn more about private keys here and here.
So the two main takes aways for your private key is:
- It is used to sign transactions
- Prove you own the related public key
And without it, you can do NOTHING. As such, you should never share it with anyone under any circumstance. Both your password to your wallet and your seed phrase need to be secured in a non-digital location. And if have a nice cozy, warm Hobbit hole to store it in, then that will work just fine!
The day of the bill fold may be a thing of the past, but the wallet as a concept will continue on into the future, and the ability to hold and carry decentralized, digital cash puts the control of our financial future back into our hands once again.
Live above the sun!
The Pied Piper
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