HOW DO CRYPTO WALLETS WORK?
When someone sends Bitcoin, Ethereum, Dogecoin, or any other type
of digital currency to your crypto wallet, you are not actually
transferring any coins. What they are doing is signing off ownership
thereof to your wallet’s address. That is to say, they are confirming
that the crypto on the blockchain no longer belongs to their address but
yours. Two digital codes are necessary for this process: a public key
and a private key.
A public key is a string of letters and numbers automatically generated
by the crypto wallet provider. For example, a public key could look
like this: B1Robo539i7L822can5oY5xgV614.
A private key is another string of numbers and letters but one that only
the owner of the wallet should know.
Think of a crypto wallet as an email account. To receive an email, you
need to give people your email address. This would be your public key
in the case of crypto wallets, and you need to share it with others to be
part of any blockchain transaction. However, you would never give
someone the password to access your email account. For crypto
wallets, that password is equivalent to your private key, which under
no circumstances should be shared with another person.
Using these two keys, crypto wallet users can participate in
transactions without compromising the integrity of the currency being
traded or of the transaction itself. The public key assigned to your
digital wallet must match your private key to authenticate any funds
sent or received. Once both keys are verified, the balance in your
crypto wallet will increase or decrease accordingly.
