Section 4 // ●●●○ Level: Medium; Hard Quick Links: 2: Blockchain | 3: Smart contracts | Dashboard: Web3 Starter Pack |

<aside> 🥡 KEY TAKEAWAY Wallet is a physical device or software-based service that stores public and private keys used for cryptocurrency transactions and secure storage for crypto.

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What is a wallet?

A crypto wallet or wallet for short is a physical device or software-based service which can operate standalone or as a browser extension. The wallet’s purpose is to store public and private keys which are used for processing cryptocurrency transactions.

Wallets do not hold coins - they hold the key to coins which are actually stored on public blockchain networks.

What is the difference between public and private keys?

<aside> 🔒 Key is a long string of random, unpredictable characters. Every public key is paired with one corresponding private key. They are used together to encrypt and decrypt data.

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• Public keys allow users to receive cryptocurrency transactions. It’s public and open to anyone in the system.
• Private keys prove users’ ownership of respective public key. It must be stored securely and kept secret.

Why do I need a wallet?

Wallet are required to participate in Web3 to any extent. There are some Web3 distributed apps that do not require use of a wallet, but majority do.

Wallets have the ability to encrypt the data and are used for:

👉 executing smart contracts

👉 processing crypto transactions

👉 identification

👉 legally signing a document/agreement

Types of wallets

There are two main types of wallets: hot and cold. The key differentiator between them is the Internet connection.

Hot wallets are connected to the Internet and are more accessible and easier for hackers to access them.