What Is A Digital Wallet? It’s Really As Simple As It Sounds.
Okay, so you have your head around the idea of the currently emerging Blockchain technology and you pretty much understand what a cryptocurrency is, now onto the next step -- what is all this talk about a ‘digital wallet’?
Think of your current wallet and how that works.
You have access to your physical coins and notes, known in financial terms as fiat currency, and you can put them all into your wallet where you can keep track of how much you have and store it for as long as you like.
According to Lachlan Feeney, a digital wallet works in exactly the same way -- except the money you store, cryptocurrency, is digitised into online coding as is the technology behind your wallet.
“In its simplest form, a digital wallet is just an application that stores or holds onto your cryptocurrency.” “They’re just simply a way to hold onto your cryptocurrencies.”
Essentially, that makes digital wallets based on the same idea as current online banking mobile applications that are available to display the funds you have stored with a bank.
In technical terms, blockchain is a peer-to-peer decentralised, distributed database known as a ‘digital ledger’ used to democratise the management of records and online transfer of objects of value -- the most popular of which at the moment is money -- from one person or group to another.
It’s comprised of permanent entries known as ‘blocks’ that are all connected, publicly monitored and unchangeable.
With anything that is built on blockchain technology, digital wallets come with both public and private keys.
They’re essentially the digital address of your wallet and the password to get into it.
When it comes to your private key, that serves as the unique digital code that only you have access to in order to unlock what would essentially be a big padlock on the front of your physical wallet -- except all of this happens within the mechanism behind whichever mobile wallet app or service you choose to use and you never actually see the process at work. According to Emma Poposka, the CEO of digital currency management company BronTech, that last choice between a mobile app wallet or an advanced programme determines exactly where your private key is recorded and represents one of the major problems for blockchain technology and digital wallets.
In other words, it’s all about how secure you can keep your password.
“[Digital wallets are] as secure as you keep your password,” she told HuffPost Australia.
“This is one of the biggest problems for mainstream adoption.
“People are used to losing their passwords or their keys. “People want to forget their password and ask for banks to supply their password.
“You don’t have that option with a private key -- if you lose them you lose your money.
“The money will be in that address but you won’t be able to access it.”
That leaves the security of your digital wallet up to your discretion -- whether it be with a mobile app connected to a system that stores your private key, or you put confidence in yourself to not lose your code.
Can You Only Store Money In A Digital Wallet?
Here’s the great thing: because everything that is put onto a blockchain system -- whether it be money or a source of information -- is translated into a digital code, digital wallets can be used as a storage place for pretty much anything that has been digitised. According to Hanson, one of the more significant pieces of information digital wallets can hold is that of your identity itself (in other words, your identification papers, passport information and visa details).
“A digital wallet is essentially a container in which you store information assets,” he said. “Information assets can be tokens of value as per cryptocurrency or they can be crypto-keys (a digital code) which can be used for cryptocurrencies or for identifiers.
“You can store identifiers [and] we can start to store a digital identity too.”
And if that isn’t enough for a digital wallet to be the first step in changing the world as we know it -- we’re not quite sure what is.