Lesson 3: Understand how a wallet works.

Why does this lesson matter?

We have already learned that cryptocurrencies include not only Bitcoin but also countless other altcoins. In fact, cryptocurrency wallets are structured differently for each cryptocurrency. It is not easy to find people who even understand how wallets work, so let's make a difference here. In this lesson, as an example, we will learn how the wallets of Bitcoin and Ethereum work.

What you can learn in this lesson

  • How the Bitcoin wallet works
  • How the Ethereum wallet works

Bitcoin is not in a wallet

In fact, Bitcoin does not come straight into the wallet.

In the case of bitcoin, what the wallet manages is not the bitcoin itself, but the history of past bitcoin usage.


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A Bitcoin wallet is a way to view the blockchain

It's a little hard to visualize, but in essence, a bitcoin wallet manages the unused balance of bitcoins associated with that wallet.

This unused balance is called UTXO (Unspent Transaction Output).

As we learned in "Getting an Overview of Cryptocurrencies," the entire transaction history of a cryptocurrency is recorded in the blockchain.

Also, the bitcoin wallet manages the past transaction history.

In other words, a bitcoin wallet is a way to view transaction information recorded in the blockchain.


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Ethereum is managed by accounts

As another example, we will learn about the Ethereum wallet.

Bitcoin was a bit more complicated, but Ethereum is very simple.

In the case of Ethereum, there is an "account" and the balance information is recorded directly in that account.

In the case of Ethereum, there is an "account," and balance information is recorded directly in that account. The name "wallet" is closer to the image of Ethereum than Bitcoin.


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