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Web3 Wallet

A Web3 wallet is a software (and/or hardware) device where a cryptocurrency (or other digital asset like an NFT) is “stored” facilitating the sending/receiving of an asset. A wallet stores private keys and shares public ones allowing users to use their assets and in the case of coins – to monitor the balance.

To spend coins the private key stored in the wallet must match the public address the coins are assigned to. If the keys match, the balance in the digital wallet will increase, and the senders will decrease. From a historical perspective, BIP-32 outlined sequentially generating private keys for use in wallets.

wallet seed web3 3109(P2)

Private keys are generated using a pseudorandom number generator. “Due to programs being so strictly defined and process-oriented, it is very difficult to capture the human concept of randomness in a computer. So, oftentimes these random generators require an input of entropy called a seed.”; which BIP-39, used to introduce a ‘mnemonic seed phrase’ to the HD wallet protocol.

This phrase is just a list of words used to generate the mnemonic seed for an HD wallet- “the resulting seed phrase is used as the seed input for the HD wallet, and all of the private keys your wallet generates can be recovered simply by remembering that phrase.” (R1)

 

EXAMPLES: wallet types:

    1. Web Based: most popular, easiest, but not the safest (mobile wallets)
    2. Paper Based: generate digital currency private keys, secure offline (bitaddress.org)
    3. Brain: random string of words for wallet access (Armory)
    4. Hot: Connected to the Internet (Coinbase)
    5. Cold: wallets kept offline
    6. Hardware Based: Trezor, Ledger -secure for large number of digital currency: Private keys stored in a micro-controller; Cannot be transferred in plain text
    7. MultiSig: requires more than one key to authorize transactions.

 

(P2)

REFERENCES:
https://en.bitcoin.it/wiki/Wallet
(R1/P1) https://pluralsight.com/guides/the-cryptography-of-bitcoin
(P2) https://www.openxcell.com/wallet
https://www.investopedia.com/terms/b/bitcoin-wallet.asp
https://blockgeeks.com/guides/cryptocurrency-wallet-guide/

Pic: Photo by Gleb Makarov on Unsplash

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