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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

  1. 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.
  2. 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

  1. 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).
  2. 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.
  3. 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

  1. 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.
  2. 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).
  3. 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.
  4. 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

  1. 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.
  2. 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

  1. 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  


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