What is a crypto wallet?

Learn what a crypto wallet is, different types that exist and how they work.

Before you can start your NFT adventure, the first thing you'll need is a crypto wallet, which will store both your currency and Non-Fungible Tokens (NFTs). You can't create, buy or sell an NFT on Dropspot without one.

What's a crypto wallet?

A crypto wallet is like your actual wallet, but instead of holding cash and credit cards, it holds proof of digital tokens like cryptocurrencies and NFTs. It's simply like a crypto bank account that only you control. The most important part of a wallet is the private key, which can be viewed as a key to a safe deposit box. Anyone who has access to the private key of a wallet can take control of the balance held there. You use this private key to initiate transactions, which is called 'signing'.

A crypto wallet will allow you to send and receive your NFTs, as well as interact with Cardano blockchain integrated websites, like Dropspot.

Crypto wallets fall under the following two general categories:

Software wallets

Software wallets are simply desktop programs, browser extensions or mobile apps that make it easy for people to send, receive, and store funds and NFTs. Funds and NFTs are held online through the use of private keys and are unique to each cryptocurrency.

Hardware wallets

A hardware wallet is a small device that can store crypto offline. They serve a similar purpose to software wallets but are physical devices that can be plugged into a computer. Hardware wallets keep private keys held offline.

How do crypto wallets work?

As mentioned above, a crypto wallet allows you to send and receive your NFTs, as well as interact with Cardano blockchain integrated websites. To better understand how crypto wallets work its important to understand the meaning of blockchain technology.

A blockchain, is defined as a public ledger that stores data in "blocks." These are records of all transactions, the balances held at any given address, and who holds the key to those balances. Crypto currency and NFT's aren't actually stored "in" a wallet, but instead exist on a blockchain and the wallet software allows you to interact with the balances and NFT's held on that blockchain, by storing addresses on the wallet itself.

For example, when a person sends you digital currency or a digital token, they are essentially signing off ownership of the currency or token to your wallet’s address. To be able to spend this currency and unlock access to the tokens, the private key stored in your wallet must match the public address the currency or token is assigned to. If the public and private keys match, the balance in your digital wallet will increase, and the senders will decrease accordingly. There is no actual exchange of real currency. The transaction is represented by a transaction record on the blockchain and a change in balance in your cryptocurrency wallet.

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