How Does an Ethereum Wallet Work?
An Ethereum wallet is a software application that allows users to store, send, and receive Ethereum (ETH) and ERC-20 tokens. It maintains your private keys, which are critical for controlling your funds, and offers a user-friendly interface for blockchain interactions.
Key Components
- Private Key: A secure digital code that gives access to your assets. Losing your private key means losing access to your funds.
- Public Key: Generated from the private key, the public key allows others to send you Ethereum. It acts similarly to an email address.
- Wallet Address: A hashed version of your public key. This is what you share with others to receive funds.
Types of Ethereum Wallets
Ethereum wallets can be categorized into three main types:
- Hot Wallets: These are connected to the internet, offering convenience for daily transactions but are more vulnerable to hacking.
- Cold Wallets: Offline storage options such as hardware wallets or paper wallets, providing enhanced security for long-term storage.
- Web Wallets: Accessible through web browsers; these wallets are easy to use but require trust in third-party service providers.
Usage
To use an Ethereum wallet, you must first create an account and securely keep your private key. Transactions involve signing them with your private key and broadcasting them to the Ethereum network, where they are verified and added to the blockchain.