How to Make Online Payments Secure with a Blockchain-based Cryptocurrency Wallet

Blockchain is not just a fancy buzzword used by marketers to attract customers. On the contrary, it’s one of the most important technological innovations since the founding of the Internet, according to many tech enthusiasts.

A blockchain-based wallet is considered the most secure cryptocurrency wallet and belongs to the number of products that are essential in the FinTech world. It stores our cryptocurrencies and helps us make safe and secure transactions.

Yet, people still don’t understand how these wallets work and how exactly are payments secured when we use them.

Here’s the secret:

Wallets are essentially just communicating with various blockchains to make transactions possible. In a way, they’re nothing more than a tool. Still, the world of cryptocurrencies revolves around them.

To find out how they make payments secure, we need to dig a bit deeper and explain how wallets communicate with blockchains.

Decentralized Ledger Makes Blockchain Transactions Immutable

Well, that’s a bit confusing heading, isn’t it? Let us explain.

A decentralized ledger is a record of all transactions happening on blockchain, meaning every time you request a transaction, it’s stored on the ledger. However, the decentralized part is what we’re interested in.

You see, plenty of computers around the globe are part of the blockchain network and help it operate. Your transaction needs to be validated by every single computer (node) that’s on the network. Once it is, it’s stored on a ledger that’s copied to every single node.

Here’s the catch:

These computers all have a continuously updated ledger. When a cyberattacker tries to change information about transactions, they will be able to do it in one instance of the ledger, while all other instances will have the real, unaltered version.

This makes transactions immutable. They cannot be deleted, as records about them are stored on the chain forever.

Private and Public Keys

Blockchain provides levels of security that were unheard of before it was invented. Still, wallets don’t like leaving anything up to chance, so every crypto wallet has additional security options.

One of them is using private and public keys.

Public Keys

Every wallet owner needs some kind of identification, and it’s called a public key. There’s a good reason why it’s referred to as public — you get to share it with the world.

One of the most common examples used to explain the purpose of the public key is email. To receive an email, someone needs to use your email address and input it in the field for the receiver.

That’s how public keys work essentially. The only difference is – you don’t get to receive information. Instead, you receive cryptocurrencies.

The process works in a similar way when you want to send money to someone (or make a payment to a service). You enter their wallet address (their public key), and the amount of money you wish to send them.

The only difference between keys and emails is that public keys make no sense – they’re just a random string of numbers and characters.

Still, what we’re really interested in is your private key, which actually adds another layer of security to your wallet.

Private Keys

A private key equals your password. Whenever you need to log in to your Facebook account, or Google suite, or any online platform that you’re part of, you need to enter your username (or email) and password. That’s basically how it works with online cryptocurrency wallets.

What makes private keys different from addresses is that if you lose them or forget them, there’s no way to get a new one. It means that your cryptocurrencies will remain locked forever and inaccessible to anyone except those who get the private key right. That’s fairly difficult, given that private keys are also long and make no sense.

However impractical, private keys are a great way to secure your wallet.

Centralized entities that use standard log-in procedures are often hacked. If someone can access your email, all they have to do is request a password change on your Facebook and get an opportunity to create a new password via email. From that point on, you’re doomed.

Now, whether private keys should be the only solution is subject to discussion. Still, they are definitely the most effective (and the only so far) way to protect your wallet.

The good news is that many online wallets are actually operated by centralized entities, which sometimes offer to store them for you and promise that they don’t have access to them.

Conclusion

To sum up, cryptocurrency wallets reached new levels of security, meaning they offer state-of-the-art protection for those who make online transactions using them. All of that is possible thanks to the powerful underlying technology which supports most of the cryptocurrencies nowadays – blockchain.

On top of that, wallets have their own security protocols that ensure your funds cannot get stolen. Therefore, feel free to select a wallet you like and enter the wondrous world of crypto payments. Don’t worry — once you get used to it, you’ll understand how practical and convenient cryptocurrency transactions actually are, especially compared to fiat money.