As there are many terms to such a large project like Elastos and Cyber Republic, we’ve decided to build a growing glossary of terms that can help the less technically acquainted understand better what the tech means and the impact it could have. In this edition we’re focusing on cryptocurrency wallets.
“A cryptocurrency wallet is an app that allows cryptocurrency users to store and retrieve their digital assets. As with conventional currency, you don’t need a wallet to spend your cash, but it certainly helps to keep it all in one place. When a user acquires cryptocurrency, such as bitcoins, she can store it in a cryptocurrency wallet and from there use it to make transactions.” – Source
One of the most frequently misunderstood aspects of storing and managing cryptocurrency is the wallet. A cryptocurrency wallet, unlike how it sounds, does not store funds in it at all. It is an interface to interact with your funds tracked and stored on the blockchain’s public ledger.
What does this mean, practically?
- If you lose your wallet, you can still restore it if you have the private key.
- If the wallet becomes obsolete, it’s not really an issue as long as the blockchain itself is not obsolete as well; your funds are still yours.
- Anyone with your private key can access your funds even if they aren’t using or holding your digital wallet.
- If you lose your private key, or if it’s stolen, it is akin to losing a physical wallet. Your funds are gone, and there’s no recovering it.
The use of the term “wallet” in cryptocurrency is perhaps one of the most frustrating and misleading terms still commonly used. It has led to mistakes that have cost people fortunes. It is unlikely that the term used to describe an interface to interact with your funds will change, so instead it is important that education and awareness be spread as widely as possible.