🎓What is a wallet?
📋 ELI5: The Blockchain
Imagine that Anna and Mark send money to each other. To keep track of what they send they have set up a spreadsheet, it looks kind of like this:
Each row in that spreadsheet is a separate transaction between Anna and Mark. Each row has a bunch of columns, like 'amount' and 'time' so they can keep track of how much money they have passed back and forth, and at what time this happened.
This is how databases work: they have rows and columns containing information about events that happened in that database. The blockchain is just a public database that anyone can access - a spreadsheet like the one above, showing every single transaction ever made.
👜 ELI15: The "Wallet" Address
In order to add a new transaction to the spreadsheet you need to identify yourself so we can keep track of who's sending things (and where). But part of blockchain technology is that we don't use names like Anna or Mark. We instead use anonymous addresses to represent you as a user. They can look like this:
0xfe7992b11ac9c5d2b7aae8b14333275e822ba9xx
To do anything on the blockchain you need your own unique address like the one above. This is called a wallet address.
When people say they have crypto in their wallet, they actually mean that there are coins, tokens and/or NFTs belonging to their wallet address. But you don't actually log in to the blockchain, there is no username or password...so how do you actually access those coins, tokens or NFTs?
You use a private key!
🔑 ELI20: Private Key / Seed Phrase
When you create a wallet you're given a unique address but you also get something called a private key. This is a long unique series of characters that acts as your password for "logging in" to your wallet. To make it easier for you to write down and remember your private key it's often presented in the form of a seed phrase, which is usually 12 or 24 english words that look something like this:
bull form bicycle green lamp star robot yellow bar car movie grass
Your seed phrase and your private key are the same thing, just presented differently.
So now think of your address as your username and your private key as your password. This is how you "log in" to the blockchain to use your wallet. The combination of your address and private key IS your wallet. The term wallet is slightly confusing - think of it more as your account.
Before we move on you need to understand that there is NEVER any reason whatsoever for anyone (other than yourself) to know your private key / seed phrase. Guard your private key / seed phrase as if it's a password to access all your funds, because it is.
If anyone knows your private key or seed phrase, they have full access to all the funds in your wallet. NEVER give it out.
We'll say it again: do NOT give out your private key or seed phrase to ANYONE. There are literally only two exceptions to this rule:
The private key is part of your will - you want your heirs to inherit your crypto if you pass away
You're importing your wallet to a new browser extension or computer (you need the private key to import your wallet)
The most common hacks in crypto are not hacks at all, they are scams that involve you giving someone your private key or seed phrase (usually this is done through someone pretending to be customer service and asking for your seed phrase in order to "help" with your issue - but it can also be a site pretending to need your seed phrase to "log in").
So we are going to say it a third time: do NOT under any circumstances give out your private key or seed phrase to anyone, ever. Your private key can NOT be changed so if anyone gets hold of it the only way to solve it is to set up a new wallet.
Ok so what about my address...is that ok to give out?
The answer here is yes: your address can't be used to access your assets - and people will need your address to send you things via the blockchain.
But keep in mind that anyone that knows your address can check all of your transactions and see exactly how many coins, tokens and/or NFTs you have. The blockchain is public! So a good tip is to avoid connecting your address to any identifiable information like your name or email address. Especially if you're sitting on a lot of valuable assets, as this will attract scammers.
Any tips on keeping my private key safe?
Yes: do NOT keep it on your computer or phone - those devices can be accessed by hackers and scammers, and phones tend to sync a lot of information through the cloud.
The most common solution we see is that people write down their seed phrase on two pieces of paper, then they keep those two pieces of paper somewhat separate (in case something happens to one of them). To protect against paper getting wet people sometimes use lamination machines.
There are other more clever solutions as well, our favourite being this nifty trick (this one is for a 12-word seed phrase but you can adapt it for a 24-word seed phrase too):
Create three pieces of paper
On the first one, write down the first 8 words from your seed phrase
On the second one, write down the last 8 words from your seed phrase
On the third one, write down words 1-4 and then words 8-12 of your seed phrase
You can now keep these three pieces in different locations, for example: one at home, one in a bank safe and one with your parents. This way if one gets lost or destroyed, you can always recover the full seed phrase using just two of the other pieces. If someone has just one of the pieces they can't do anything with just 8 words of your seed phrase - you always need at least two of the pieces to get the full seed phrase.
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