Wallet and User Account in Several Cryptocurrency Systems - Introduction
When we first step into the world of cryptocurrency, the first component we encounter or install is always the wallet. We probably hear some terms like private key, address, etc when we interact with our wallet. Wallet is the place holding some secret in order to use the cryptocurrency we own. But the way how a wallet works largely depends on how the cryptocurrency system is designed.
In this series of articles, we touch how the cryptocurrency system works, how the user is identified by account and then the private key, and we have a better picture on how wallets are working.
There are many cryptocurrency systems. Here we just introduce Bitcoin, Ethereum, NEM and IOTA. Beside the native currency, we also take a look on the token if it is supported on the platform.
Note: in this article the transaction record is kept in a public ledger, which commonly known as blockchain in many implementations. Among the four systems, IOTA is not using blockchain technology. Therefore I use the term ledger rather than blockchain. But you can easily consider the ledger as blockchain in Bitcoin, Ethereum and NEM, while it means Tangle in IOTA.
Although the essence of cryptocurrency is cryptography, we do not go into detail in this part of mathematics. However, there is a very foundation knowledge that helps us understand the user account systems and therefore the wallets. Here is an introduction.
This is the relationship of three components, namely, private key, public key and address.
Quite amazingly, it is the common part in the four cryptocurrencies (or probably all), besides some difference in implementation.
The arrow is a mathematical relationship (or more precisely, a cryptographical relationship), such that.
- Once we have a private key, the public key and the address are generated from that private key.
- The same private key always generates the same set of public key and address.
- There is no way to revert the process. That is to say, from the address and public key, we cannot find out what the private key is.
- It is almost impossible to find two different private keys that can generate the same public key and address.
This build the foundation for cryptocurrency. Both address and public key can be made public, while private key is kept secret by the address owner.
As said, this setup is common in these four cryptocurrency systems, we will take a look how it’s implemented in them.