In a nutshell, wallets are nothing more
than tools for accessing, sending and
receiving crypto assets such as Bitcoin or Ethereum. In a strict sense, a wallet may only
refer to any storage of such private/public key
pair. That may be in paper form (paper wallet – a
rather unsecure solution) on an encrypted external storage device
(hardware wallet) or stored securely on any user device or online
by software featuring additional functionality, such as being an
interface for sending transactions to the blockchain (software
wallet). Software wallet software almost always features the
possibility to create new private key public key pairs/accounts at
the touch of a button and allows secure storage. In the Ethereum
blockchain, for example, one of the most commonly used wallets is a
software program named Metamask, which is installed as a simple
browser extension. Once installed, a new Ethereum account can be
generated and the public address is immediately shown. As indicated
earlier, no transaction in the blockchain is needed for this. An
account is created in the blockchain under this public key only
when any cryptocurrency is transferred to the public key. This may
happen when funds are added to the account for the first time, for
example by transferring them from an existing account/wallet to the
newly created one. Multiple service providers meanwhile offer
transfer of cryptocurrency against a corresponding amount of fiat
A wallet can be either a physical
medium such as paper or a device, or
a software program.
A wallet is essentially used
to store single or
multiple public key / private key pairs.
A wallet only interacts with a
blockchain but does not contain the crypto assets themselves.
If you were to ask how funds are transferred in blockchains, the
reply would be through wallets. But how do these wallets work and
what does the term technically mean?
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Blockchains usually feature individual
accounts that are only set up if a transaction to or
from it is initiated. Each account is addressed by and consists of
a public alphanumerical key (public key), which is derived from a
matching private key only known to the account owner. Both keys are
cryptographically linked. A correlating public key could be
calculated for any given private key but not vice versa, and both
keys allow for asymmetric encryption. Therefore, any transaction
initiated for a given public key can be and must be
signed/authorised with the corresponding private key and the
validity of the signature can be verified by the public key. The
private/public key pair is not stored in the blockchain but is
usually generated and stored off-chain. Only the public key may be
stored on-chain as an account number.
Schoenherr Attorneys at Law
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As NFT trading primarily runs on the Ethereum blockchain we
needed to use a crypto-wallet for our NFT self-experiment that supports Ether.
From the variety of crypto-wallets on the market we decided to use
the software-wallet Metamask which we installed as a browser
extension of our google chrome web browser. The main reason for
this was the fact that the NFT platform (OpenSea) we used for the
placement of our NFT required us to have a software wallet that the
respective web applications could communicate with. In this case a
physical wallet (paper or device) would not be suitable and would
only have caused complications for us. What crypto-wallet did we choose for our NFT self-experiment
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