How Crypto Wallets Work

How Crypto Wallets Work?

How Crypto Wallets Work?

In the real world, everyone has a wallet to put their money or credit cards in. It is simple and everyone knows how a wallet works: you put money and credit cards in and take them out when you need to use them. And if you lose your wallet, you lose everything inside. Simple as that.

What are crypto wallets?

Crypto wallets, however, are not as simple as that. All wallets do not actually store the crypto assets inside as all of your crypto assets are actually stored on the blockchain itself. A wallet collects information, also known as a transaction ledger, from the blockchain network and displays all the information to a user. For example, when you access your Ethereum account on SecuXess (a web application or an operating portal to manage your crypto assets in connection with your SecuX wallet), the system will use your keys to find the corresponding ledger on the Ethereum network and display it on your device and SecuXess. You might ask then what is the point of a crypto wallet when all it does is pull the information from the blockchain network for you to look at and it does not store any actual coins.

Crypto wallets store your private key

So what do crypto wallets actually do? Crypto wallets store your private key, which is the most crucial information to your cryptocurrency. As you know, every piece of information on the blockchain is public, except your private key. Your private key is needed to access your funds and authorize transactions and your keys prove your ownership of your digital money and allow you to make transactions. If you lose your private keys, you lose access to your money.

Hardware wallets keep private key OFFLINE

Hardware wallets protect your private key in an offline environment, only to use the key to sign off on transactions. The difference between a hardware wallet and a software is that for a software wallet, your private key is always online. Hackers can also access your private key if they hacked your login info. Hardware wallets prevent all of that.


Private and Public Keys

Bitcoin, as well as all other major cryptocurrencies that came after it, is built upon public-key cryptography, a cryptographic system that uses pairs of keys: public keys, which are publicly known and essential for retrieving information, and private keys, which are kept secret and are used for authentication and encryption.

Private key generates addresses and public key

Major cryptocurrencies like Bitcoin and Ethereum function using three fundamental pieces of information: the address, associated with a balance and used for sending and receiving funds, and the address’ corresponding public and private keys. The generation of a bitcoin address begins with the generation of a private key. From there, its corresponding public key can be derived using an algorithm. The address, which can then be used in transactions, is a shorter, representative form of the public key.

Private key authorizes any outgoing transactions

The private key is what grants a cryptocurrency user ownership of the funds on a given address. The wallet automatically generates and stores private keys for you. When you send from a wallet, the software signs the transaction with your private key, without actually disclosing it, which indicates to the entire network that you have the authority to transfer the funds on the address you’re sending from.

One-way street system

The security of this system comes from the one-way street that is getting from the private key to the public address. It is not possible to derive the public key from the address; likewise, it is impossible to derive the private key from the public key.


Wallet Recovery

Private key is generated by the Recovery Words

When you create a wallet for the first time, the device will provide you with a new set of Recovery Words, normally a set of 12, 18 or 24 words which is also known as a mnemonic phrase. The private key is then generated by the encryption algorithm with the Recovery Words, and  which is  the only way for you to recover your existing wallet in the future. Losing your Recovery Words means you will never be able to recover the same wallet anymore.

Recovering an existing wallet

When you try to recover an existing wallet by entering the Recovery Words, the wallet will recover your private key from the words. With those Recovery Words, anyone can recover your wallet on any BIP32, BIP39 and BIP 44 compatible wallets and it will link to the same account on the blockchain network. They will also be able to do transactions from that device. Therefore, it is imperative that you keep your Recovery Words in a safe place and never share them with anyone.


BIP 32, 39 and 44

BIP39 or Bitcoin Improvement Proposal: 39 is one of the many design ideas that was approved by an economic majority of the Bitcoin community and became a standard for many popular wallets. BIP39 is the use of a mnemonic phrase, a group of easy to remember words, to serve as a backup to recover your wallet and coins in the event your wallet becomes compromised, lost, or destroyed. This is also known as Recovery Words. These words aren’t just any words. They are pulled from a specific list of 2048 words known as the BIP39 wordlist. When setting up your wallet for the first time, wallets that utilize the BIP39 standard will provide you with a 12,18, or 24 word phrase randomly chosen from the standard BIP39 wordlist.

As we have mentioned before, anyone can recover your wallet on any BIP39 compatible wallet using your Recover Words. When they do, they will be able to move all of your funds to their own address. Therefore, it is imperative that you keep your Recovery Words in a safe place and never share them with anyone.


Hidden Wallet

25th Recovery Word Passphrase

SecuX wallets also have a feature called the Hidden Wallet and it is an advanced feature that enables extra protection to your crypto assets. You can create a hidden wallet by setting up with a passphrase that is a combination of 1-99 English letters and numbers of your choosing and it will act as the 25th Recovery Word when recovering. Hidden Wallet generates an extra wallet that exists parallel to the one you had already set up. Since it is hidden, you can distribute your assets and create safer backups all within one device. In the event of a robbery or ransomware attack, you can surrender your 24 recovery words and first PIN where you have less cryptocurrencies in the accounts to the attackers, and still have full control and access to your hidden wallet accounts and assets with your 24 recovery words, passphrase and hidden wallet PIN.

To read more about SecuX’s Hidden Wallet feature, please visit our website at //


Coin Support

Our wallets currently support 1000+ coins and tokens, including major coins such as Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), Ripple(XRP), Bitcoin Cash (BCH), Binance (BNB), Litecoin (LTC), Stellar (XLM), Dashcoin (DASH), Digibite (DGB), Groestlcoin (GRS), Tron (TRX), Cardano (ADA), Binance Smart Chain (BSC) and all of the ERC-20 tokens, BEP-20 tokens, and the more popular TRC-10 and TRC-20 tokens. Our team is also continuously looking for ways to add support for more coins and tokens.

For a complete list of coins and tokens we support, please visit our website at //