Blockchain Wallet is an E-wallet used to store bitcoins or other cryptocurrencies that are bought by any user. As the signature is cryptographically signed, transactions are highly secured. Blockchain helps people in exchanging the funds through a safe and secure channel. It is comparable to different payment gateways such as Visa, Paypal but in this case cryptocurrency is the element to be transferred.
When a blockchain wallet is created a private and public key is generated to the user. In order to receive funds, a public key is required to be shared to the other user. In order to spend the funds, a private key is used which should not be shared with anyone. A user needs to choose a secure wallet where it has minimal chances for its private key to be leaked, otherwise the account can be compromised and there will be high chance to lose all the funds.
Users can send a request to another party for a specific amount of bitcoin or any other cryptocurrency, and the system generates a unique address or a Quick Response (QR) code that can be sent to a third party.
When a user makes a request, always a unique address is generated. A cryptocurrency can be sent if they have the other person's unique address. The send-and-receive process is similar to sending or receiving the amount through any commonly used gateways such as Visa, Paypal but uses cryptocurrency instead.
On an broad perspective, there are two types of wallets:
The private keys are stored on a cloud based server. In terms of accessibility, hot wallets are much more faster to use and the speed of transaction is faster than a cold wallet. But in case of security it is at a high risk of unrecoverable theft. Examples of hot wallets are Coinbase and Blockchain.info.
The application that runs on the device or hardware wallet and it is more secure than hot wallets. This type of wallet is not directly accessible to a third party professional. All the process are run on hardware and only the hash part of the transaction is ran on cloud or blockchain server. Examples of cold wallets are Trezor and Ledger.
Wallets can be further broken down into more types.
Why should we use Blockchain Wallets?
Any transaction requires the intervention of the banks which can result a slow process or high chances of failure. Data can also be stored in unsecured or manipulated systems. Blockchains can help in solving these problems. It is important to keep a track of all the transactions and once the transactions are made they are not irreversible.