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Class23 Digital Wallets

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42 views17 pages

Class23 Digital Wallets

Uploaded by

tharunkumar0973
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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DIGITAL WALLET

 A digital wallet (or e-wallet) is a software-based system that securely stores


users' payment information and passwords for numerous payment methods and
websites.
 By using a digital wallet, users can complete purchases easily and quickly with
near-field communications technology.
 Digital wallets can be used in conjunction with mobile payment systems, which
allow customers to pay for purchases with their smart phones.
 A digital wallet can also be used to store loyalty card information and
digital coupons.
Summary:
 Digital wallets are financial accounts that allow users to store funds, make
transactions, and track payment histories by computer.
 These pieces of software may be included in a bank's mobile app, or as a
payments platform like PayPal or Phonepe.
 Digital wallets are also the main interface for using cryptocurrencies such as
Bitcoin.
 Advantage: Digital wallets largely eliminate the need to carry a physical
wallet by storing all of a consumer's payment information securely and
compactly.
 Disadvantage: Digital wallets are a potential boon to companies that
collect consumer data.
BLOCKCHAIN WALLETS
What a Wallet Does?
A wallet is a program that has three main functions:
1. Generating, storing and handling your keys and addresses
2. Showing you your balance
3. Creating and signing transactions to send funds

Note: Having access to your private keys


means to be able to spend your money.
How the BLOCKCHAIN WALLETS works?
 A private key is just a huge number that is cryptographically related to a public
key address, another huge number.
 Private key is the proof to the network (say, Bitcoin network) that you are the
owner of the coins associated with the matching public addresses.
 Some kind of software is required to use the information in the wallet on the
network.
 Key Takeaway:
Wallet doesn't contain currency, it contains keys.
Working of Wallets

 Wallets show you your balance, generate an address to receive funds by just clicking
“deposit” or “receive”, and provide you with a simple interface to send funds.
 All you need to do is enter the address that you would like to send money to and the
amount you want to transfer. The signing procedure using your private key will happen
in the background when you click send.
 The person who have the associated private key could take control of coins assigned
to that public key address because that private key is the only way the system knows
that anyone owns the public key.
 There's no opening an account.
 As soon as funds are transferred to that public address, the network will see that that
address is associated with the funds.
 But only if you have a cryptographically matching private key will the network allow
you to then control them.
 Currency is actually stored on the network and not in a wallet. Even then, the coins
themselves aren't really stored, it's the transactions that are stored.
 What you're trading is actually ownership over tokens which can be traced all the way
back to whenever those tokens were created on the network from mining, for
example.
Summary:
 For private keys you keep in your wallet, let you prove that you control the
coins assigned to their associated addresses, and you can then assign
ownership of them to someone else's address,
 Then whoever owns that address can control them and assign them to
someone else and so on.
OR
 The account address that is associated with the Bitcoins you possess and the
address that you receive coins with, is a public key with a matching private key
that only you possess.
TYPES OF WALLETS
 Wallets come in many varieties. The idea is just to keep your private keys
secure.
TYPES OF WALLETS
(More details)
1. Hosted Web Wallets
 With hosted web wallets, the keys are stored online by a trusted third party.
 These parties are mostly exchanges such as Coinbase, Binance or Bittrex.
 When you create an account with these entities they will create an entry in their internal
database linking your account to a set of key pairs for the different coins they have listed.

 There is always a third party risk,


no matter how trustworthy the
party might seem.
2. Non-Hosted Web Wallets/
Browser Based Wallets
 The most popular non-hosted web wallet is likely MyEtherWallet, which can store
Ether (ETH) and all ERC-20 tokens (tokens that are “living” on the Ethereum
blockchain).
 Those wallets provide an interface to check your funds or create transactions in your
web browser, but you have to provide the keys with each login.
 There is a range of options to access your
wallet with MyEtherWallet (MEW). The first
option requires your address but only lets
you view your funds.
 A non-hosted web wallet is quite convenient
and just as secure.
Non-Hosted Web Wallets/ Browser Based Wallets:
MetaMask
 A crypto wallet & gateway to blockchain apps
 MetaMask is a software cryptocurrency wallet used
to interact with the Ethereum blockchain.
 It allows users to access their Ethereum wallet
through a browser extension or mobile app, which
can then be used to interact with decentralized
applications.
 MetaMask was created to meet the needs of
secure and usable Ethereum-based web sites.
 In particular, it handles account management and
connecting the user to the blockchain.
 MetaMask allows users to manage accounts and
their keys in a variety of ways, including hardware
wallets, while isolating them from the site context.
3. Desktop and Mobile Wallets

Desktop and Mobile Wallets: Keys are stored on the device


having the wallet.
Mobile Wallets
 Mobile wallets, as the name suggests, are installed on
mobile devices.
 They can provide various methods to make payments, most
notably the ability to use smartphone cameras to scan QR
codes quickly and make payments.
 Usually, there is a PIN, password or Face-/Touch-ID
protection to access the wallet.
4. Paper Wallets

 A paper wallet is your public and private key pair printed on paper.
 Almost every cryptocurrency offers a paper wallet generator.
 To create a key pair you generally first have to create some entropy (keys to be as
random as possible).
 The main risk with a paper wallet is you actually losing or destroying the wallet by
accident.
5. Hardware Wallets

 With a hardware wallet, keys are stored on the device in something called the “secure
element”.
 The secure element is a place to store data (here, keys) that cannot be directly
accessed by the computer or any other device even when it is connected.
 To use a hardware wallet you usually have a few options of which interface to use with
it. Like MyEtherWallet, a few other wallets offer hardware wallet support.

Advantage:
 The private key(s) do not leave the device, so they
are not visible to the computer being using the
hardware wallet with at any time.
 This is why a hardware wallet is considered the most
secure way of storing crypto, especially in large
amounts.

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