Overview

A cryptocurrency wallet is a device, physical medium, program or an online service which stores the public and/or private keys for cryptocurrency transactions. In addition to this basic function of storing the keys, a cryptocurrency wallet more often offers the functionality of encrypting and/or signing information. Signing can for example result in executing a smart contract, a cryptocurrency transaction (see "bitcoin transaction" image), identification, or legally signing a 'document' (see "application form" image).

History

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.” 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.

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. 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. After the release of version 0.9, the software bundle was renamed Bitcoin Core to distinguish itself from the underlying network. Bitcoin Core is, perhaps, the best known implementation or client. Forks of Bitcoin Core exist, such as Bitcoin XT, Bitcoin Unlimited, and Parity Bitcoin.

Software wallets

Software wallets are software applications that allow users to manage and transfer digital assets, and sign messages.

There are several modes in which software wallets can operate. They have an inverse relationship with regard to trustlessness and computational requirements.

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. 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 crypto to be stolen. An example of such a security breach occurred with Mt. Gox in 2011.

Cold storage

"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. The credentials necessary to spend crypto can be stored offline in a number of different ways, from simple paper printouts of private keys, to specialized hardware wallets.

Paper wallets

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. The paper wallet can then be stored in a safe physical location for later retrieval. Physical wallets can also take the form of metal token coins with a private key accessible under a security hologram in a recess struck on the reverse side.^([better source needed]) The security hologram is tamper-evident technology which self-destructs when removed from the token, showing that the private key has been accessed.

The British Museum's coin collection includes four specimens of funded bitcoin tokens; one is currently on display in the museum's money gallery.