A Beginners Guide To Blockchain-based Wallet And How Do They Work

A Beginners Guide To Blockchain-based Wallet And How Do They Work

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It’s not so long when we got introduced to cryptocurrencies like Bitcoin, Ethereum, and Ripple. They were the talk of the town even before the people had a proper knowledge about it. The concept of blockchain wallets is still not known by many of us. Both of them are linked and interdependent but different. It is important to understand both the terms to get started working with digital currencies and its investments.  

digital wallet


Most of us know that blockchain technology is an encrypted system that helps in protecting the information from the third party. In the same way, digital currencies need protection too just like our money in our accounts. Cryptocurrencies cannot make transactions like sell, buy, exchange through normal bank accounts, therefore, it needs blockchain wallets to go ahead with the transactions.

Blockchain wallet is just like a digital wallet, only the difference is that the transactions are made by buying/selling the cryptocurrencies and not with actual money in our banks or wallets. Just like digital wallets give access to make transactions using the money in our banks, the blockchain wallets help to make the transaction through cryptocurrency.  

In simple words, blockchain wallets are needed for making the transactions using cryptocurrencies. Blockchain wallets do not save the information of cryptocurrencies, they record and keep a track of all the transaction of cryptocurrencies like buying, sell, exchange.


Blockchain wallets or Cryptocurrency wallets work on a system which stores private and public keys, this system enables the users to make safe and validated transactions while buying, selling, exchanging one or multiple cryptocurrencies.

As mentioned above, blockchain wallets do not save cryptocurrencies. So, the question arises that how are transactions made, and how are cryptocurrencies are sent?

Blockchain wallets save the private and public keys which help in the interaction and exchange of the cryptocurrencies. When one user sends the cryptocurrency, it has a public key assigned and to buy the cryptocurrency, both public and private key(assigned to a specific user) has to match. When both the keys matches, the amount is added from one user and gets deducted from another. Obviously, there is no actual exchange of money or coins are involved. The transaction is visible just in the wallets of the specific users/buyer/seller.

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Software Wallets:

Software wallets are the downloadable or accessible systems which can be used through various devices depending on the type for which each one is made for. The software can be used on laptops, desktops, mobile phones depending upon the type of wallet.

Software wallets are further divided into 3 categories:

  • Desktop:

FEATURE: Through desktops, the software could be downloaded or accessed online and can only be used through the device it is installed on and cannot be used on any other device. If a user is looking for stable and not so often used wallets, then this is the most suitable one.

DRAWBACK: Many times, a virus enters the desktop system which might be hazardous to the information and funds.

  • Online

FEATURE: These are available on the web browser and so, are available on all types of devices like desktop, laptop, and mobile phones.

DRAWBACK: The private keys are saved online while using the software online which makes the information prone to be released to the third party, leading the information to a risk.

  • Mobile

FEATURE: Mobile makes the wallet accessible anytime, anywhere and also makes the fund transfer easy with the help of QR codes.

DRAWBACK: If our phone gets into the wrong hand, information could be revealed.

No wallets or transactions could lead to problems if one is attentive in using wallets and making the transactions. Safety measures are a must while making fund transfer in every case.

Hardware Wallets:

Hardware wallets are accessed through an offline process. The information and currencies are saved in a hardware device like USB. To access these wallets and use them to make transactions, one has to connect to the internet and enter the pin. This is the safest form of wallets as all the information is saved offline and is not prone to any unsafe activities on the internet.

Paper Wallets:

Paper wallets are usually used along with the software wallets. Paper wallets are used by generating a pair of key(public or private) from a software application which is then gets printed onto a paper to make the transaction possible. The currency has to be transferred to public address on paper after which when funds are needed to be unlocked, the currency is transferred from paper to software wallet, the process generally known as sweeping. This can be done either by scanning the QR codes or by adding the keys manually.


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One of the most famous and easy place to acquire crypto wallets are the web browsers and app stores. Also, there are many online stores known for providing crypto wallets. Myetherwallet.com, IMtoken, Gnosis, MyTrezor, Crowdwiz are some of the famous and most used digital wallets.

Keeping a check on the walletes and securing them depends upon its type and service providers. It has been observed that offline wallets are comparatively more secure than online wallets. But it has also been increasingly implemented the ways to secure the online wallets. the most important part to secure each type of wallets are the keys, as if you lose it your coins are prone to be lost easily. Some precautions to be taken to keep your wallet scures are:

  • Software should be updated timely without any delays.
  • Additional keys should be added for unbreakable security passwords.
  • Wallet should be regularly updated.  

In the trend where cryptocurrencies are on a hype, it is important to understand about the wallets thoroughly. There are various crypto wallets used by people like coinbase, trezor, electrum etc. With these wallets getting too much into fashions there are various blockchain development companies bridging a way to successful digital currency transactions. It is a way of investing money in a platform and earning thereafter.    

No doubt, the blockchain-based wallets aka digital wallets are about to change customer’s online shopping experience forever!

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