How ETH Wallet works internally
An Ethereum (ETH) wallet is a software application or service that allows users to store, send, and receive Ethereum and Ethereum-based tokens. Here’s how an ETH wallet typically works:
1. Public and Private Keys
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Public Key:
- A wallet is associated with a pair of cryptographic keys: a public key and a private key.
- The public key is derived from the private key through mathematical algorithms (elliptic curve cryptography).
- It serves as the wallet's address where others can send ETH or tokens.
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Private Key:
- The private key is a secret number known only to the wallet owner.
- It is used to access and manage the funds associated with the wallet.
- It is crucial to keep the private key secure and never share it with anyone.
2. Wallet Types
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Software Wallets:
- Desktop Wallets: Installed on a computer, providing full control over keys and transactions (e.g., MetaMask, MyEtherWallet).
- Mobile Wallets: Apps on smartphones, offering convenience and accessibility (e.g., Trust Wallet, Coinbase Wallet).
- Web Wallets: Accessed via a web browser, storing keys locally or on a third-party server (e.g., MetaMask Web Wallet).
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Hardware Wallets:
- Physical devices designed specifically for securely storing cryptocurrency keys offline (e.g., Ledger Nano S, Trezor).
- They provide enhanced security by isolating keys from internet-connected devices.
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Paper Wallets:
- A physical printout or handwritten record of both the public and private keys.
- Used as a cold storage solution, keeping keys offline to mitigate online threats.
3. Wallet Functionality
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Address Generation:
- Wallets generate Ethereum addresses from the private key using cryptographic algorithms.
- Each address is unique and acts as a destination for receiving ETH and tokens.
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Transactions:
- Users initiate transactions by signing them with their private keys.
- Transactions include the recipient's address, amount, and optional data.
- Once signed, transactions are broadcast to the Ethereum network for validation and inclusion in blocks (mining).
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Balance and History:
- Wallets display the current balance of ETH and tokens associated with the address.
- They maintain a transaction history showing incoming and outgoing transactions.
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Security and Backup:
- Wallets emphasize the importance of securely storing and backing up private keys.
- Backup options may include mnemonic phrases (seed phrases) or encrypted backups.
4. Interfacing with Ethereum Network
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Integration with Ethereum Clients:
- Wallets connect to Ethereum nodes (e.g., Geth, Parity) or client APIs (e.g., Infura) to interact with the Ethereum blockchain.
- They retrieve blockchain data, verify transactions, and monitor network status.
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Smart Contract Interaction:
- Advanced wallets allow interaction with smart contracts deployed on the Ethereum blockchain.
- Users can execute contract functions, send tokens, or participate in decentralized finance (DeFi) activities.
5. Token Support
- ERC-20 Tokens:
- Most Ethereum wallets support ERC-20 tokens, which are fungible tokens based on Ethereum's smart contract standard.
- Users can store, send, and receive various tokens alongside ETH in their wallets.
Published on: Jul 08, 2024, 11:36 PM