Cryptocurrency wallet#Private and public key generation

In 2008 bitcoin was introduced as the first cryptocurrency following the principle outlined by Satoshi Nakamoto in the paper “Bitcoin: A Peer-to-Peer Electronic Cash System.”{{Cite web |last=Nakamoto |first=Satoshi |title=Bitcoin: A Peer-to-Peer Electronic Cash System |url=https://bitcoin.org/bitcoin.pdf |access-date=2023-02-26 |archive-date=2014-03-20 |archive-url=https://web.archive.org/web/20140320135003/https://bitcoin.org/bitcoin.pdf |url-status=live }} The project was described as an electronic payment system using cryptographic proof instead of trust. It also mentioned using cryptographic proof to verify and record transactions on a blockchain.{{Citation |title=What are blockchain and cryptocurrency? |date=2022 |url=http://dx.doi.org/10.5040/9781526521682.chapter-002 |work=Blockchain and Cryptocurrency: International Legal and Regulatory Challenges |publisher=Bloomsbury Professional |doi=10.5040/9781526521682.chapter-002 |isbn=978-1-5265-2165-1 |access-date=2023-02-26|url-access=subscription }}{{Cite news |date=2021-11-16 |title=Soon You'll Be Saying, 'There's a Blockchain App for That' |language=en |work=Bloomberg.com |url=https://www.bloomberg.com/news/articles/2021-11-16/what-is-blockchain-how-the-technology-transforms-daily-life |access-date=2023-12-03 |archive-date=2022-05-12 |archive-url=https://web.archive.org/web/20220512184548/https://www.bloomberg.com/news/articles/2021-11-16/what-is-blockchain-how-the-technology-transforms-daily-life |url-status=live }}

The first wallet program, simply named Bitcoin, and sometimes referred to as the Satoshi client, was released in January 2009 by Satoshi Nakamoto as open-source software.{{Cite magazine |last=Davis |first=Joshua |date=10 October 2011 |title=The Crypto-Currency: Bitcoin and its mysterious inventor |url=https://www.newyorker.com/magazine/2011/10/10/the-crypto-currency |url-status=live |magazine=The New Yorker |archive-url=https://web.archive.org/web/20141101014157/http://www.newyorker.com/magazine/2011/10/10/the-crypto-currency |archive-date=1 November 2014 |access-date=31 October 2014}} In version 0.5 the client moved from the wxWidgets user interface toolkit to Qt, and the whole bundle was referred to as Bitcoin-Qt.{{Cite thesis |last=Skudnov |first=Rostislav |title=Bitcoin Clients |publisher=Turku University of Applied Sciences |url=http://publications.theseus.fi/bitstream/handle/10024/47166/Skudnov_Rostislav.pdf?sequence=1 |type=Bachelor's Thesis |year=2012 |access-date=16 January 2014 |url-status=live |archive-url=https://web.archive.org/web/20140118104507/http://publications.theseus.fi/bitstream/handle/10024/47166/Skudnov_Rostislav.pdf?sequence=1 |archive-date=18 January 2014}} After the release of version 0.9, the software bundle was renamed Bitcoin Core to distinguish itself from the underlying network.{{cite web |title=Bitcoin Core version 0.9.0 released |url=https://bitcoin.org/en/release/v0.9.0 |url-status=live |archive-url=https://web.archive.org/web/20150227213613/https://bitcoin.org/en/release/v0.9.0 |archive-date=27 February 2015 |access-date=8 January 2015 |website=bitcoin.org}}{{Cite news |last=Metz |first=Cade |date=19 August 2015 |title=The Bitcoin Schism Shows the Genius of Open Source |magazine=Wired |publisher=Condé Nast |url=https://www.wired.com/2015/08/bitcoin-schism-shows-genius-open-source/ |url-status=live |access-date=3 July 2016 |archive-url=https://web.archive.org/web/20160630230101/http://www.wired.com/2015/08/bitcoin-schism-shows-genius-open-source |archive-date=30 June 2016}} Bitcoin Core is, perhaps, the best known implementation or client. Forks of Bitcoin Core exist, such as Bitcoin XT, Bitcoin Unlimited,{{Cite news |last=Vigna |first=Paul |date=17 January 2016 |title=Is Bitcoin Breaking Up? |work=The Wall Street Journal |url=https://www.wsj.com/articles/is-bitcoin-breaking-up-1453044493 |url-status=live |access-date=8 November 2016 |archive-url=https://web.archive.org/web/20160820144312/http://www.wsj.com/articles/is-bitcoin-breaking-up-1453044493 |archive-date=20 August 2016}} and Parity Bitcoin.{{Cite news |last=Allison |first=Ian |date=28 April 2017 |title=Ethereum co-founder Dr Gavin Wood and company release Parity Bitcoin |work=International Business Times |url=http://www.ibtimes.co.uk/ethereum-co-founder-dr-gavin-wood-company-release-parity-bitcoin-1619025 |url-status=live |access-date=28 April 2017 |archive-url=https://web.archive.org/web/20170428032027/http://www.ibtimes.co.uk/ethereum-co-founder-dr-gavin-wood-company-release-parity-bitcoin-1619025 |archive-date=28 April 2017}}

There are several modes in which wallets can operate. They have an inverse relationship with regard to trustlessness and computational requirements.{{Cite journal |last1=Truong |first1=Nguyen |last2=Lee |first2=Gyu Myoung |last3=Sun |first3=Kai |last4=Guitton |first4=Florian |last5=Guo |first5=YiKe |date=2021-11-01 |title=A blockchain-based trust system for decentralised applications: When trustless needs trust |url=https://www.sciencedirect.com/science/article/pii/S0167739X21001758 |journal=Future Generation Computer Systems |volume=124 |pages=68–79 |doi=10.1016/j.future.2021.05.025 |issn=0167-739X |arxiv=2101.10920 |access-date=2024-05-18 |archive-date=2024-05-18 |archive-url=https://web.archive.org/web/20240518201658/https://www.sciencedirect.com/science/article/pii/S0167739X21001758 |url-status=live }}

• Full clients verify transactions directly by downloading a full copy of the blockchain (over 150 GB {{as of|2018|January|lc=y}}).{{Cite web |title=Bitcoin blockchain size 2009-2024 |url=https://www.statista.com/statistics/647523/worldwide-bitcoin-blockchain-size/ |access-date=2024-05-18 |website=Statista |language=en |archive-date=2024-05-18 |archive-url=https://web.archive.org/web/20240518204356/https://www.statista.com/statistics/647523/worldwide-bitcoin-blockchain-size/ |url-status=live }} They do not require trust in any external parties. Full clients check the validity of mined blocks, preventing them from transacting on a chain that breaks or alters network rules.{{r|Antonopoulos2014|p=ch. 1}} Because of its size and complexity, downloading and verifying the entire blockchain is not suitable for all computing devices.{{citation needed|date=November 2023}}
• Lightweight clients consult full nodes to send and receive transactions without requiring a local copy of the entire blockchain (see simplified payment verification – SPV). This makes lightweight clients much faster to set up and allows them to be used on low-power, low-bandwidth devices such as smartphones. When using a lightweight wallet, however, the user must trust full nodes, as it can report faulty values back to the user. Lightweight clients follow the longest blockchain and do not ensure it is valid, requiring trust in full nodes.{{cite web |last1=Gervais |first1=Arthur |last2=O. Karame |first2=Ghassan |last3=Gruber |first3=Damian |last4=Capkun |first4=Srdjan |title=On the Privacy Provisions of Bloom Filters in Lightweight Bitcoin Clients |url=https://eprint.iacr.org/2014/763.pdf |url-status=live |archive-url=https://web.archive.org/web/20161005045518/https://eprint.iacr.org/2014/763.pdf |archive-date=5 October 2016 |access-date=3 September 2016}}

Third-party internet services called online wallets or webwallets offer similar functionality but may be easier to use. In this case, credentials to access funds are stored with the online wallet provider rather than on the user's hardware.{{Cite news |last=Bill Barhydt |date=4 June 2014 |title=3 reasons Wall Street can't stay away from bitcoin |publisher=NBCUniversal |url=https://www.cnbc.com/2014/06/04/3-reasons-wall-street-cant-stay-away-from-bitcoin.html |url-status=live |access-date=2 April 2015 |archive-url=https://web.archive.org/web/20150403052101/https://www.cnbc.com/id/101711220 |archive-date=3 April 2015}} As a result, the user must have complete trust in the online wallet provider. A malicious provider or a breach in server security may cause entrusted bitcoins to be stolen. An example of such a security breach occurred with Mt. Gox in 2011.{{cite web |date=4 March 2014 |title=MtGox gives bankruptcy details |url=https://www.bbc.com/news/technology-26420932 |url-status=live |archive-url=https://web.archive.org/web/20140312001338/http://www.bbc.com/news/technology-26420932 |archive-date=12 March 2014 |access-date=13 March 2014 |website=bbc.com |publisher=BBC}}

{{multiple image

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| image1 = Bitcoin paper wallet generated at bitaddress.jpg

| caption1 = A paper wallet with a banknote-like design. Both the private key and the address are visible in text form and as 2D barcodes.

| image2 = Sample Bitcoin paper wallet.png

| caption2 = A paper wallet with the address visible for adding or checking stored funds. The part of the page containing the private key is folded over and sealed.

| image3 = Casascius_coin.jpg

| caption3 = A brass token with a private key hidden beneath a tamper-evident security hologram. A part of the address is visible through a transparent part of the hologram.

| image4 = 10elqpi.jpg

| caption4 = A hardware wallet peripheral which processes bitcoin payments without exposing any credentials to the computer

}}

Wallet software is targeted by hackers because of the lucrative potential for stealing bitcoins.{{Cite news |last=Jeffries |first=Adrianne |date=19 December 2013 |title=How to steal Bitcoin in three easy steps |work=The Verge |url=https://www.theverge.com/2013/12/19/5183356/how-to-steal-bitcoin-in-three-easy-steps |url-status=live |access-date=17 January 2014 |archive-url=https://web.archive.org/web/20190727141228/https://www.theverge.com/2013/12/19/5183356/how-to-steal-bitcoin-in-three-easy-steps |archive-date=27 July 2019}} "Cold storage" simply means keeping the private keys out of reach of hackers by storing or generating them on a device that is not connected to the internet.{{Cite news |last=Roberts |first=Daniel |date=15 December 2017 |title=How to send bitcoin to a hardware wallet |work=Yahoo Finance |url=https://finance.yahoo.com/news/send-bitcoin-hardware-wallet-140141385.html |url-status=live |access-date=17 February 2018 |archive-url=https://web.archive.org/web/20180217142235/https://finance.yahoo.com/news/send-bitcoin-hardware-wallet-140141385.html |archive-date=17 February 2018}}{{Cite book |last=Antonopoulos |first=Andreas M. |title=Mastering Bitcoin: Unlocking Digital Crypto-Currencies |publisher=O'Reilly Media |year=2014 |isbn=978-1-4493-7404-4 |author-link=Andreas Antonopoulos}}{{rp|ch. 4}}{{Cite book |last1=Barski |first1=Conrad |title=Bitcoin for the Befuddled |last2=Wilmer |first2=Chris |publisher=No Starch Press |year=2015 |isbn=978-1-59327-573-0}}{{rp|39}} The credentials necessary to spend bitcoins can be stored offline in a number of different ways, from simple paper printouts of private keys, to specialized hardware wallets.{{r|Antonopoulos2014|page=ch. 10}}

A paper wallet is created with a keypair generated on a computer with no internet connection; the private key is written or printed onto the paper and then erased from the computer.{{rp|ch. 4}} The paper wallet can then be stored in a safe physical location for later retrieval.{{r|befuddled|page=39}}

Physical wallets can also take the form of metal token coins{{cite web |last=Staff |first=Verge |date=13 December 2013 |title=Casascius, maker of shiny physical bitcoins, shut down by Treasury Department |url=https://www.theverge.com/2013/12/13/5207256/casascius-maker-of-shiny-physical-bitcoins-shut-down-by-treasury |url-status=live |archive-url=https://web.archive.org/web/20140110010445/http://www.theverge.com/2013/12/13/5207256/casascius-maker-of-shiny-physical-bitcoins-shut-down-by-treasury |archive-date=10 January 2014 |access-date=10 January 2014 |website=The Verge}} with a private key accessible under a security hologram in a recess struck on the reverse side.{{Cite book |last1=Ahonen |first1=Elias |title=Encyclopedia of Physical Bitcoins and Crypto-Currencies |last2=Rippon |first2=Matthew J. |last3=Kesselman |first3=Howard |publisher=Elias Ahonen |year=2016 |isbn=978-0-9950-8990-7}}{{rp|38}} The security hologram self-destructs when removed from the token, showing that the private key has been accessed.{{cite web |last=Mack |first=Eric |date=25 October 2011 |title=Are physical Bitcoins legal? |url=https://www.cnet.com/news/are-physical-bitcoins-legal/ |url-status=live |archive-url=https://web.archive.org/web/20190626215256/https://www.cnet.com/news/are-physical-bitcoins-legal/ |archive-date=26 June 2019 |access-date=19 May 2019 |website=CNET}} Originally, these tokens were struck in brass and other base metals, but later used precious metals as bitcoin grew in value and popularity.{{r|Ahonen2016|page=80}} Coins with stored face value as high as ₿1,000 have been struck in gold.{{r|Ahonen2016|page=102–104}} The British Museum's coin collection includes four specimens from the earliest series{{r|Ahonen2016|page=83}} of funded bitcoin tokens; one is currently on display in the museum's money gallery.{{cite web |last=British Museum |author-link=British Museum |year=2012 |title=Bitcoin token with digital code for bitcoin currency |url=https://www.britishmuseum.org/research/collection_online/collection_object_details.aspx?objectId=3451294&partId=1&people=185966&peoA=185966-3-9&page=1 |access-date=17 May 2019 |archive-date=2019-10-10 |archive-url=https://web.archive.org/web/20191010014657/https://www.britishmuseum.org/research/collection_online/collection_object_details.aspx?objectId=3451294&partId=1&people=185966&peoA=185966-3-9&page=1 |url-status=live }} In 2013, a Utah manufacturer of these tokens was ordered by the Financial Crimes Enforcement Network (FinCEN) to register as a money services business before producing any more funded bitcoin tokens.{{r|Ahonen2016|page=80}}

A hardware wallet is a small and portable computer peripheral that signs transactions as requested by the user. These devices store private keys and carry out signing and encryption internally, and do not share any sensitive information with the host computer except already signed (and thus unalterable) transactions.{{cite tech report|first=Myrto|last=Arapinis|first2=Adriana|last2=Gkaniatsou|first3=Dimitris|last3=Karakostas|first4=Aggelos|last4=Kiayias|title=A Formal Treatment of Hardware Wallets|institution=University of Edinburgh, IOHK|year=2019|url=https://eprint.iacr.org/2019/034.pdf}} Because hardware wallets never expose their private keys, even computers that may be compromised by malware do not have a vector to access or steal them.{{r|befuddled|page=42–45}}The user sets a passcode when setting up a hardware wallet. As hardware wallets are tamper-resistant,{{rp|ch. 10}} without the passcode the assets cannot be accessed.

A cryptocurrency wallet works by a theoretical or random number being generated and used with a length that depends on the algorithm size of the cryptocurrency's technology requirements. The number is converted to a private key using the specific requirements of the cryptocurrency cryptography algorithm requirement. A public key is then generated from the private key using whichever cryptographic algorithm is required. The private key is used by the owner to access and send cryptocurrency and is private to the owner, whereas the public key is to be shared to any third party to receive cryptocurrency.{{Cite web |last=Baloian |first=Artiom |date=2021-12-18 |title=How To Generate Public and Private Keys for the Blockchain |url=https://baloian.medium.com/how-to-generate-public-and-private-keys-for-the-blockchain-db6d057432fb |access-date=2023-09-27 |website=Medium |language=en |archive-date=2023-09-27 |archive-url=https://web.archive.org/web/20230927133243/https://baloian.medium.com/how-to-generate-public-and-private-keys-for-the-blockchain-db6d057432fb |url-status=live }}

Up to this stage no computer or electronic device is required and all key pairs can be mathematically derived and written down by hand. The private key and public key pair (known as an address) are not known by the blockchain or anyone else. The blockchain will only record the transaction of the public address when cryptocurrency is sent to it, thus recording in the blockchain ledger the transaction of the public address.

Collision (two or more wallets having the same private key) is theoretically possible, since keys can be generated without being used for transactions, and are therefore offline until recorded in the blockchain ledger. However, this possibility is effectively negated because the theoretical probability of two or more private keys being the same is extremely low. The number of possible wallets and thus private keys is extremely high,{{Cite web |last1=Singer |first1=David |last2=Singer |first2=Ari |date=2018 |title=Big Numbers: The Role Played by Mathematics in Internet Commerce |url=https://case.edu/affil/sigmaxi/files/CryptoslidesSinger.pdf}}{{Cite book |last=Kraft |first=James S. |url= |title=An introduction to number theory with cryptography |date=2018 |others=Lawrence C. Washington |isbn=978-1-315-16100-6 |edition=2nd |location=Boca Raton, FL |oclc=1023861398}} so duplicating or hacking a certain key would be inconceivable.{{Cite web |url=https://www.researchgate.net/publication/342801641 |title=Yadav, Nagendra Singh & Goar, Vishal & Kuri, Manoj. (2020). Crypto Wallet: A Perfect Combination with Blockchain and Security Solution for Banking. International Journal of Psychosocial Rehabilitation. 24. 6056-6066. 10.37200/IJPR/V24I2/PR2021078. |access-date=2021-09-16 |archive-date=2021-09-16 |archive-url=https://web.archive.org/web/20210916193515/https://www.researchgate.net/publication/342801641_Crypto_Wallet_A_Perfect_Combination_with_Blockchain_and_Security_Solution_for_Banking |url-status=live }}{{Cite journal|last=Guler|first=Sevil|date=2015|title=Secure Bitcoin Wallet|url=https://core.ac.uk/download/pdf/83597444.pdf|journal=UNIVERSITY OF TARTU FACULTY OF MATHEMATICS AND COMPUTER SCIENCE Institute of Computer Science Computer Science Curriculum|pages=48|via=core.ac.uk|access-date=2021-04-25|archive-date=2021-06-28|archive-url=https://web.archive.org/web/20210628174815/https://core.ac.uk/download/pdf/83597444.pdf|url-status=live}}

In modern convention a seed phrase is now utilised which is a random 12 to 24 (or even greater) list of dictionary words which is an unencrypted form of the private key. (Words are easier to memorize than numerals). When online, exchange and hardware wallets are generated using random numbers, and the user is asked to supply a seed phrase. If the wallet is misplaced, damaged or compromised, the seed phrase can be used to re-access the wallet and associated keys and cryptocurrency in toto.Shaik, Cheman. (2020). Securing Cryptocurrency Wallet Seed Phrase Digitally with Blind Key Encryption. International Journal on Cryptography and Information Security. 10. 1-10. 10.5121/ijcis.2020.10401.

A number of technologies known as wallets exist that store the key value pair of private and public key known as wallets. A wallet hosts the details of the key pair making cryptocurrency transactions possible. Multiple methods exist for storing keys or seeds in a wallet.Jokić, Stevo & Cvetković, Aleksandar Sandro & Adamović, Saša & Ristić, Nenad & Spalević, Petar. (2019). Comparative analysis of cryptocurrency wallets vs traditional wallets. Ekonomika. 65. 10.5937/ekonomika1903065J.

A {{not a typo|brainwallet}} or brain wallet is a type of wallet in which one memorizes a passcode (a private key or seed phrase).{{Cite book |last1=Vasek |first1=Marie |last2=Bonneau |first2=Joseph |last3=Castellucci |first3=Ryan |last4=Keith |first4=Cameron |last5=Moore |first5=Tyler |title=Financial Cryptography and Data Security |chapter=The Bitcoin Brain Drain: Examining the Use and Abuse of Bitcoin Brain Wallets |date=2017 |editor-last=Grossklags |editor-first=Jens |editor2-last=Preneel |editor2-first=Bart |editor2-link=Bart Preneel |chapter-url=https://discovery.ucl.ac.uk/id/eprint/10154816/ |series=Lecture Notes in Computer Science |volume=9603 |language=en |location=Berlin, Heidelberg |publisher=Springer |pages=609–618 |doi=10.1007/978-3-662-54970-4_36 |isbn=978-3-662-54970-4}}{{Cite book |last1=Kent |first1=Peter |url=https://books.google.com/books?id=8ch6EAAAQBAJ&dq=%22brain+wallet%22&pg=PA101 |title=Bitcoin For Dummies |last2=Bain |first2=Tyler |date=2022 |publisher=John Wiley & Sons |isbn=978-1-119-60213-2 |pages=102 |language=en |access-date=2023-02-22 |archive-date=2023-04-08 |archive-url=https://web.archive.org/web/20230408102737/https://books.google.com/books?id=8ch6EAAAQBAJ&dq=%22brain+wallet%22&pg=PA101 |url-status=live }} {{not a typo|Brainwallets}} may be attractive due to plausible deniability or protection against governmental seizure,{{Cite web |last=Castellucci |first=Ryan |title=Cracking Cryptocurrency Brainwallets |url=https://rya.nc/files/cracking_cryptocurrency_brainwallets.pdf |url-status=live |archive-url=https://web.archive.org/web/20201108140408/https://rya.nc/files/cracking_cryptocurrency_brainwallets.pdf |archive-date=8 November 2020 |access-date=28 December 2022 |website=rya.nc}} but are vulnerable to password guessing (especially large-scale offline guessing). Several hundred {{not a typo|brainwallets}} exist on the Bitcoin blockchain, but most of them have been drained, sometimes repeatedly.

DApp browsers are specialized software that supports decentralized applications. DApp browsers are considered to be the browsers of Web3 and are the gateway to access the decentralized applications which are based on blockchain technology. That means all DApp browsers must have a unique code system to unify all the different codes of the DApps.{{Cite web |title=The New Frontier: Cryptocurrency Wallets and DApp Browsers Redefining Access {{!}} SimpleSwap |url=https://simpleswap.io/blog/crypto-wallets-and-dapp-browsers |access-date=2024-05-18 |website=SimpleSwap {{!}} Cryptocurrency exchange blog |language=en |archive-date=2024-05-18 |archive-url=https://web.archive.org/web/20240518214603/https://simpleswap.io/blog/crypto-wallets-and-dapp-browsers |url-status=live }}

While crypto wallets are focused on the exchange, purchase, sale of digital assets and support narrowly targeted applications, the browsers support different kinds of applications of various formats, including exchange, games, NFTs marketplaces, etc.

In addition to the basic function of storing the keys, a cryptocurrency wallet may also have one or more of the following characteristics.

File:An actual Bitcoin transaction from the Kraken cryptocurrency exchange to a hardware LedgerWallet.jpg

A simple cryptocurrency wallet contains pairs of public and private cryptographic keys. The keys can be used to track ownership, receipt or spend cryptocurrencies.{{cite book|last1= Antonopoulos |first1= Andreas |title=Mastering Bitcoin: Programming the Open Blockchain|date=12 July 2017|publisher=O'Reilly Media, Inc.|access-date=14 September 2017|isbn=9781491954386 |url= https://books.google.com/books?id=MpwnDwAAQBAJ&pg=PA93}} A public key allows others to make payments to the address derived from it, whereas a private key enables the spending of cryptocurrency from that address.{{Cite web|url=https://www.dailydot.com/debug/bitcoin-wallets-cryptocurrency-hardware/|title=Bitcoin Wallets: What You Need to Know About the Hardware|date=2018-11-20|website=The Daily Dot|language=en|access-date=2019-03-10|archive-date=2021-03-22|archive-url=https://web.archive.org/web/20210322064351/https://www.dailydot.com/debug/bitcoin-wallets-cryptocurrency-hardware/|url-status=live}}

The cryptocurrency itself is not in the wallet. In the case of bitcoin and cryptocurrencies derived from it, the cryptocurrency is decentrally stored and maintained in a publicly available distributed ledger called the blockchain.

Multi-chain wallets are designed to support multiple blockchain networks, enabling users to store, manage, and transact different types of cryptocurrencies from a single interface. Unlike single-chain wallets, which are limited to a specific blockchain, multi-chain wallets provide a unified experience for handling various assets. These wallets enhance convenience and security by reducing the need for multiple wallet applications and providing integrated features for multiple digital assets.

Features of a multi-chain wallet:

• Support for Multiple Blockchains: Users can hold and manage various blockchains such as Bitcoin, Ethereum, Klever Blockchain, Binance Smart Chain, and more within one wallet.
• Enhanced Security: Typically incorporate advanced security measures including two-factor authentication and seed phrase backup.
• Interoperability: Facilitates seamless transactions across different blockchain networks.
• User-friendly Interface: Designed to be accessible and intuitive, making it easier for users to navigate and manage their assets.

Popular multi-chain wallets include Trust Wallet, Klever Wallet and Exodus, each offering unique features and support for multiple blockchains, therefore, hundreds of cryptocurrencies.

File:European Blockchain Services Infrastructure EBSI wallet.jpg

Some wallets are specifically designed to be compatible with a framework. The European Union is creating an eIDAS compatible European Self-Sovereign Identity Framework (ESSIF) which runs on the European Blockchain Services Infrastructure (EBSI). The EBSI wallet is designed to (securely) provide information, an eID and to sign 'transactions'.

In contrast to simple cryptocurrency wallets requiring just one party to sign a transaction, multi-sig wallets require multiple parties to sign a transaction.{{Cite web|url=http://fortune.com/2017/12/11/bitcoin-price-btc-ethereum-cryptocurrency-wallet/|title=Bitcoin Startup Predicts Cryptocurrency Market Will Grow By $100 Billion in 2018|website=Fortune|language=en|access-date=2019-02-15|archive-date=2020-12-04|archive-url=https://web.archive.org/web/20201204214206/https://fortune.com/2017/12/11/bitcoin-price-btc-ethereum-cryptocurrency-wallet/|url-status=dead}} Multisignature wallets are designed for increased security.{{Cite web|url=https://www.cnbc.com/2017/07/20/32-million-worth-of-digital-currency-ether-stolen-by-hackers.html|title=$32 million worth of digital currency ether stolen by hackers|last=Graham|first=Luke|date=2017-07-20|website=CNBC|access-date=2019-02-15|archive-date=2021-03-08|archive-url=https://web.archive.org/web/20210308053524/https://www.cnbc.com/2017/07/20/32-million-worth-of-digital-currency-ether-stolen-by-hackers.html|url-status=live}} Usually, a multisignature algorithm produces a joint signature that is more compact than a collection of distinct signatures from all users.{{cite book|last1=Bellare|author-link=Mihir Bellare|first1=Mihir|last2=Neven|first2=Gregory|title=Topics in Cryptology – CT-RSA 2007 |chapter=Identity-Based Multi-signatures from RSA |journal=Topics in Cryptology – CT-RSA|date=2006|volume=4377|pages=145–162|doi=10.1007/11967668_10|series=Lecture Notes in Computer Science|isbn=978-3-540-69327-7|citeseerx=10.1.1.207.2329}} There are various use cases for using a multisignature wallet like: enhanced security, treasury management, partnership management, escrow services, inheritance planning, regulatory compliance and backup recovery.{{Cite web|url=https://www.lace.io/blog/what-are-the-security-benefits-of-using-a-multisignature-wallet#representative-shared-wallet-beta-use-cases|title=What are the security benefits of using a multisignature wallet?|website=Lace.io|language=en|access-date=2025-02-24}}

In the cryptocurrency space, smart contracts are digitally signed in the same way a cryptocurrency transaction is signed. The signing keys are held in a cryptocurrency wallet.

File:Creating-Atala_PRISM-crypto_wallet-seed_phrase.png

A sequential deterministic wallet utilizes a simple method of generating addresses from a known starting string or "seed". This would utilize a cryptographic hash function, e.g. SHA-256 (seed + n), where n is an ASCII-coded number that starts from 1 and increments as additional keys are needed.{{Citation |title=Cryptographic Theory and Decentralized Finance |date=2022 |url=https://www.cambridge.org/core/books/history-of-financial-technology-and-regulation/cryptographic-theory-and-decentralized-finance/1B681294E33D542AF79168FD2CA98F03 |work=A History of Financial Technology and Regulation: From American Incorporation to Cryptocurrency and Crowdfunding |pages=112–128 |editor-last=Oranburg |editor-first=Seth C. |place=Cambridge |publisher=Cambridge University Press |doi=10.1017/9781316597736.010 |isbn=978-1-107-15340-0 |access-date=2023-02-26|url-access=subscription }}

The hierarchical deterministic (HD) wallet was publicly described in BIP32.{{cite web |title=Bip32 |url=https://www.cs.utexas.edu/users/moore/acl2/manuals/current/manual/index-seo.php/BITCOIN____BIP32 |publisher=University of Texas at Austin |access-date=17 October 2021 |archive-date=17 October 2021 |archive-url=https://web.archive.org/web/20211017180614/https://www.cs.utexas.edu/users/moore/acl2/manuals/current/manual/index-seo.php/BITCOIN____BIP32 |url-status=live }} As a deterministic wallet, it also derives keys from a single master root seed, but instead of having a single "chain" of keypairs, an HD wallet supports multiple key pair chains.

This allows a single key string to be used to generate an entire tree of key pairs with a stratified structure.{{cite web |last1=Gutoski |first1=Gus |last2=Stebila |first2=Douglas |title=Hierarchical deterministic Bitcoin wallets that tolerate key leakage |url=https://eprint.iacr.org/2014/998.pdf |website=iacr.org |publisher=International Association for Cryptologic Research |access-date=2 November 2018 |archive-date=25 September 2018 |archive-url=https://web.archive.org/web/20180925020039/https://eprint.iacr.org/2014/998.pdf |url-status=live }}

BIP39 proposed the use of a set of human-readable words to derive the master private key of a wallet.{{citation needed|date=April 2023}} This mnemonic phrase allows for easier wallet backup and recovery, due to all the keys of a wallet being derivable from a single plaintext string.{{how|date=April 2023}}

In a non-deterministic wallet, each key is randomly generated on its own accord, and they are not seeded from a common key. Therefore, any backups of the wallet must store each and every single private key used as an address, as well as a buffer of 100 or so future keys that may have already been given out as addresses but not received payments yet.{{cite web |last1=Acharya |first1=Vivek |title=How Ethereum Non-Deterministic and Deterministic Wallets Work |url=https://blogs.oracle.com/acharyavivek/how-ethereum-non-deterministic-and-deterministic-wallets-work |publisher=Oracle Corporation |access-date=17 October 2021 |date=30 June 2021 |archive-date=17 October 2021 |archive-url=https://web.archive.org/web/20211017180606/https://blogs.oracle.com/acharyavivek/how-ethereum-non-deterministic-and-deterministic-wallets-work |url-status=live }}{{rp|94}}

A wallet can also have known or unknown vulnerabilities. A supply chain attack or side-channel attack are ways of introducing vulnerabilities. In extreme cases even a computer which is not connected to any network can be hacked.{{Cite web |url=https://cyber.bgu.ac.il/advanced-cyber/airgap |title=Air-gap jumpers on cyber.bgu.ac.il |access-date=2018-10-17 |archive-date=2019-08-19 |archive-url=https://web.archive.org/web/20190819092929/https://cyber.bgu.ac.il/advanced-cyber/airgap |url-status=dead }}

To mitigate the risk of crypto wallet hacking, one can choose for a cold wallet, which remains offline and disconnected from the internet. A cold wallet refers to a physical device, such as a pen drive, that is utilized as a secure storage medium for transferring money from a hot wallet.{{Cite web |last=Sigalos |first=MacKenzie |date=2022-11-12 |title=FTX says it's removing trading and withdrawals, moving digital assets to a cold wallet after a $477 million suspected hack |url=https://www.cnbc.com/2022/11/12/ftx-says-its-removing-trading-and-withdrawals-moving-digital-assets-to-a-cold-wallet-after-a-477-million-suspected-hack.html |access-date=2023-12-03 |website=CNBC |language=en |archive-date=2022-11-19 |archive-url=https://web.archive.org/web/20221119155230/https://www.cnbc.com/2022/11/12/ftx-says-its-removing-trading-and-withdrawals-moving-digital-assets-to-a-cold-wallet-after-a-477-million-suspected-hack.html |url-status=live }}

When using a merchant site that accepts server-side digital wallets, customers enter their name, payment, and delivery information. Following the purchase, the customer is requested to register for a wallet with a user name and password for future purchases.{{Cite web |last=Budgar |first=Laurie |date=2021-01-04 |title=What Is a Digital Wallet, and How Does It Work? |url=https://www.rd.com/article/what-is-digital-wallet/ |access-date=2024-05-18 |website=Reader's Digest |language=en-US |archive-date=2024-05-18 |archive-url=https://web.archive.org/web/20240518212156/https://www.rd.com/article/what-is-digital-wallet/ |url-status=live }}

Digital wallets can be dedicated to a single cryptocurrency (examples: Bitcoin, Etherium, Ripple, Litecoin), or they can be multi-currency (Coinomi, CoinSpot, CoinVault, Cryptonator multi-cryptocurrency wallet, Exodus, Gatehub, Holy Transaction, Jaxx Wallet, UberPay Wallet, AnCrypto Wallet, Klever Wallet.

Wallets are free for consumers but cost retailers. Wallet sellers may receive a portion of merchant purchases made through their wallets. In other circumstances, digital wallet vendors conduct cardholder-merchant transactions for a set fee.{{Cite web |last=Vittorio |first=Andrea |title=Virtual Green Cards Offer Path for Digital Wallets' Data Privacy |url=https://news.bloomberglaw.com/privacy-and-data-security/virtual-green-cards-offer-path-for-digital-wallets-data-privacy |access-date=2023-12-03 |website=news.bloomberglaw.com |language=en |archive-date=2023-12-03 |archive-url=https://web.archive.org/web/20231203120928/https://news.bloomberglaw.com/privacy-and-data-security/virtual-green-cards-offer-path-for-digital-wallets-data-privacy |url-status=live }}

• Cryptocurrency exchange
• Cryptography
• Cryptocurrency and security
• Decentralized application
• Medium of exchange
• Public-key cryptography
• Web3

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