What is a wallet address? This is a very common question that many people who are diving into the world of cryptocurrency ask. Wallets, which are an integral part of cryptocurrency, are something that every active trader of cryptocurrency makes use of regularly. Hence, it is important for you as a novice to understand how wallet addresses work, since it is a vital tool during crypto transfer. Let’s discuss in detail what a wallet address means, its type and its functions.
What is a wallet address?
A wallet address is a randomly generated unique string of letters and numbers linked to a blockchain wallet. A crypto trader can use a wallet address to receive crypto transactions to that particular wallet. Also, as a crypto wallet owner, you can generate a wallet address at any time.
The normal format of a wallet address largely depends on the kind of cryptocurrency you are dealing with. For instance, the Bitcoin (CRYPTO: BTC) wallet address is very different from the Ethereum (CRYPTO: ETH) wallet address. To receive Bitcoin into a wallet, the wallet owner has to generate a Bitcoin address. This is because using an Ethereum address will not work. If you mistakenly send cryptocurrency to the wrong kind of wallet address, it gets lost and unrecoverable.
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Wallet address explained
To expand your knowledge on the question, “what is a wallet address?”, let’s go into details about it. A blockchain, which is an abstract ledger made up of different groups of transactions, is where cryptocurrencies are stored. People can transfer cryptocurrency from one account to another on the blockchain via wallet addresses. To explain how this process works, let’s take a look at a few other components of blockchain wallets.
Blockchain wallets, also called crypto wallets, primarily have two kinds of keys: public keys and private keys. Public keys are similar to an account number where different users can send crypto transactions. The private key, on the other hand, gives you instant access to cryptocurrency funds in a particular account. It is just like a password.
Wallet addresses are hashed versions of the public key. The blockchain wallet manages the public key via the hashing function to help generate the wallet address. Hence, a wallet address can be said to be a special string of characters that represents a public key. Any transaction that is sent to the wallet address, is also transmitted to the public key. This ensures that they get to the right user.
When it comes to wallet keys, it is important to note one primary rule. You are allowed to share your crypto wallet’s public key, but you must never share your wallet’s private key. Since your private key gives people direct access to your account, anybody who has your private key can steal your cryptocurrency.
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How a wallet address works
Although the whole notion of wallet addresses and blockchain wallets may seem very complicated, they become less complicated if you go through how wallet addresses work.
For instance, if your blockchain wallet, which you want to use to receive Ethereum, you can just share the public key. However, the public key is usually lengthy, so it is common to see people share their wallet addresses. So, in your crypto wallet, you just have to select the kind of cryptocurrency that you are receiving (Ethereum). Your wallet will hash its public key so that Ethereum can generate a wallet address. You can share this generated wallet address with anybody who wishes to send you Ethereum.
Also, if have Ethereum stored on any crypto exchange and want to send it to your own wallet, you can use your wallet address. Generally, crypto exchanges help to store cryptocurrency for you in their general custodial wallets that they regulate. So sending crypto to your wallet gives you full control of it.
Types of wallets
Below, we have listed out the various types of crypto wallets to help make your selection process much easier:
1. Hot wallets
Hot wallets offer you easy and stress-free access to your cryptocurrency. Usually, they are stored either online or on your computer (depending on their provider). This type of wallet is best for little amounts of cryptocurrency that you will use frequently. For instance, if you want to engage in daily crypto trading or do online crypto purchases, hot wallets are perfect for this.
What are the types of hot wallets?
Here are the types of hot wallets available for use:
a. Online wallets
These are cloud-based wallets that you can access from any other device that has an internet connection. Generally, this type of wallet is held by a third party and this makes it to be not so secure. Although some wallet providers, like Coinbase, insure your funds. However, not all wallet providers do. So it’s best if you reach out to your wallet provider to make sure that they do.
b. Mobile wallets
Just like online wallets, mobile wallets are also held by a third party. However, this kind of wallet exists as a separate app on your device. You can use them as a method of payment, even for transacting in physical stores. However, the disadvantage is that if your smartphone gets hacked or breaks, your crypto funds may be lost.
c. Desktop wallets
These types of wallets are ones that get directly installed into your computer and you can only access them from the particular device they were installed to. The funds in a desktop wallet are also at great risk if your device has a virus, gets damaged, or gets hacked.
2. Cold wallets
Cold wallets exist offline. They either live on a USB-like device or paper. People generally use them for storing bigger amounts of cryptocurrency, which are reserved for either investment or HODL’ing.
What are the types of cold wallets?
Here are the different types of cold wallets available for use:
a. Hardware wallets
Essentially, these types of hot wallets are merely physical devices that are similar to a USB stick, which holds your wallet code or keys.
b. Paper wallet
This type is paper printed and has a QR code, as well as your wallet key and address. Receiving funds from a paper wallet is just like any other type of wallet since your wallet history and every other transaction are stored on the Blockchain.
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Wallet address examples
The particular format of any wallet address primarily depends on the kind of cryptocurrency. Since most blockchain wallets can regulate several types of cryptocurrency, they can also generate numerous types of addresses based on the cryptocurrency to be received. Here are a few examples.
Bitcoin wallet addresses generally have between the range of 26 and 35 characters and are made up of both numbers and letters. They can start with either of these; “1,” “3,” or “bc1.” A perfect example of a typical Bitcoin address is:
“1Lbcfr7sAHTD9CgdQo3HTMTkV8LK4ZnX71”.
Ethereum addresses are primarily 42-character hexadecimal wallet addresses. They’re created with the last 20 bytes of a crypto wallet’s public key and by including “0x” at the front. A perfect example of a typical Ethereum address is:
“0x1ABC7154748D1CE5144478CDEB574AE244B939B5”.
Bottom line
From the information provided above, you should be able to answer your initial question, “what is a wallet address?” The primary purpose of a wallet address is to help you receive funds in your crypto wallet. In all of these, always remember that your wallet’s public key is different from its private key. While you can share the public key to receive funds, NEVER share your wallet’s private key with anyone.
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