Blockchain wallet: a simple explanation and key features

However, there are still many people who do not understand how to manage these digital assets. Simply knowing about Bitcoin or Ethereum is not enough. You need a tool that will give you access to your funds and protect them from hacking. A blockchain wallet is just such a tool. At KISS.software, we have been helping clients integrate this modern solution into their businesses and everyday tasks for a long time.

Next, our expert Yevhen Kasyanenko will explain in simple terms what a blockchain wallet is, how it all works, and how to choose the right option for yourself or your business.

How does a blockchain wallet work?

It is important to dispel a myth right away: a crypto wallet does not hide coins like a physical safe, but only stores keys — digital signatures that confirm that you are the owner of these assets and can dispose of them to the fullest extent.

In traditional finance, the bank is responsible for security: it stores money and protects it from theft. In crypto, everything is different — here, the responsibility lies entirely with you. Therefore, choosing a wallet is not a minor detail, but a truly decisive moment: will you sleep peacefully or check every five minutes to see if your balance has disappeared?

How it works: private and public keys

Every blockchain wallet has a pair of keys — public and private. They work together as partners, but each has its own task:

• The public key is your “address” where you can send crypto. It can be compared to a bank account number: if you want tokens to be transferred to you, give this number. There is nothing secret about it, it is safe to share.
• The private key is a completely different story. It is a kind of digital signature. With the private key, you confirm your right to perform any operations with the assets on your balance.

“In short, you need a public key so that coins can be transferred to you, and a private key so that you can dispose of them. At the same time, the first option, as the name suggests, is open to everyone, while the second should be kept away from prying eyes,” summarizes Yevhen  Kasyanenko.

How does a wallet interact with the blockchain?

We have already figured out that the wallet itself does not store coins. It only shows that you have the right to dispose of them, and all transaction information is recorded in the blockchain. To connect to this system, the wallet connects to the network through special nodes and APIs — you could say that this is its way of speaking to the blockchain in the same language.

The scenario is always roughly the same and includes several stages.

Stage 1: you create a transaction

For example, you decide to send 0.01 BTC to a friend. You open your wallet, enter their address — that long string of characters that works as an account number in crypto. Next, you specify the transfer amount, and that’s it, you can press the “Send” button.

Stage 2: the wallet signs the transaction with a private key

It’s like putting your personal signature on a document: the system understands that it is you, and not someone else, who is disposing of the funds.

Step 3: The transaction goes to the network

Next, your transaction is picked up by the “network guards” — miners or validators. Each has its own method of verification, but the goal is the same — to make sure everything is fair:

• Miners run powerful computers and use computing power to solve complex problems. When the problem is solved, the transaction is considered confirmed, and the miner receives a reward in crypto.
• Validators work differently: they freeze part of their cryptocurrency in the system as collateral. If they confirm a fake transaction, their own money will be burned. Therefore, it is in their interest to check everything honestly and receive a reward for it.

This verifies that you have enough funds, that you are not trying to spend the same coin twice, and that the signature is genuine. Only then does the transfer enter the blockchain.

Stage 4: The network confirms the transfer

After verification, the transaction is added to the general list (blockchain), and your friend’s balance is updated. Now they see +0.01 BTC in their wallet.

“Different wallets can connect to the network in different ways: hardware and desktop wallets work directly, while centralized services such as exchanges act as intermediaries. Ultimately, all wallets have the same task—to correctly and securely transfer your transactions to the blockchain and back,” emphasizes our expert.

Main functions of a blockchain wallet

A blockchain wallet is designed to perform certain functions, ensuring full interaction between the user and the cryptocurrency. Below, we will examine each of these functions.

Storage and protection of cryptocurrencies

The main task of a wallet is to protect your assets. It does not hold coins itself, but controls access to them through private keys. Various mechanisms are used to ensure that this works securely:

• Data encryption – private keys are encoded so that access to funds is impossible without them.
• Backup (seed phrase) – a set of words that can be used to restore your wallet if you lose your device.
• Two-factor authentication (2FA) – requires an additional code when logging in or transferring funds so that a password alone is not enough to access the wallet.

Ultimately, these measures determine how peacefully you will sleep while your coins are on the blockchain.

Sending and receiving cryptocurrencies

Without this, a crypto wallet would be meaningless. Everything is based on a combination of public and private keys:

1. Sending funds – specify the recipient’s address, enter the amount, and confirm the transfer with your private key.
2. Commission – a small fee that goes to miners or validators for verifying the transaction. The higher the commission, the faster the network will confirm the transfer.
3. Network confirmations – until the transaction is verified by network participants, the money will not be credited to the recipient’s account.

For the user, the process looks simple: “enter the address, amount, and click send.” Everything else is the technical magic of the wallet.

Managing private keys

There is no technical support to help you out, and there is no option to click “forgot password” to restore access (unless you use hot custodial storage, which we will discuss later). Therefore, you should take key storage very seriously:

• Store them offline. Hardware wallets, flash drives, paper media — all of these are more reliable than the cloud or notes on your phone.
• Use multi-signature. This is a system where multiple keys are required to confirm a transaction. Even if one falls into the wrong hands, the attacker will not be able to do anything.
• Make backup copies of your seed phrase. This set of words is needed to restore your wallet. Keep copies in different places — one on paper, another on a secure device.

“A private key is like the only key to a safe: if you lose it, access to the assets on your balance will be closed forever,”reminds Yevhen  Kasyanenko.

Currency conversion and exchange

Many wallets can exchange coins directly within themselves. This is convenient and safer than sending crypto to an exchange, and everything works faster and easier:

• Fast exchange — for example, through built-in services such as Changelly or SimpleSwap.
• Multi-currency – you can hold Bitcoin, Ethereum, and DeFi tokens in one wallet.
• Transparent fees – you see the fee in advance and understand how much you will lose on the exchange.
• Less risk – no need to trust centralized exchanges, which sometimes “freeze” or may block withdrawals or request additional confirmations.

Essentially, the built-in exchange turns the wallet into a universal tool: store, send, and convert crypto in a couple of clicks. The idea here is simple: the less you move crypto around, the higher the security.

Integration with DeFi and dApps

Modern wallets are increasingly becoming a universal key to Web3. With their help, you can:

• access decentralized exchanges (DEX) such as Uniswap without intermediaries;
• participate in staking, farming, and other DeFi tools;
• store and buy NFTs;
• log in to websites via Web3 without a password;
• vote in DAOs and influence the development of projects.

So today, a blockchain wallet is truly an essential tool for living in a digital environment: from storing coins to participating in entire crypto ecosystems.

How to choose a reliable blockchain wallet?

When choosing a blockchain wallet, it is important to look not only at its type, but also to consider how secure, convenient, and compatible with the necessary services it is.

Types of blockchain wallets: which one to choose?

Conventionally, all wallets are divided into several categories. Each has its own advantages and risks.

Depending on how private keys are stored and how they connect to the internet, there are:

• Hot wallets are always connected to the internet. They are convenient for frequent operations: transfers, trading, DeFi. But they are also easier to hack, so keeping large amounts of money in them is a bad idea. Hot wallets also come in different types. There are online versions — web services, often built into exchanges or cloud platforms. And there are mobile and desktop applications that can be installed on a phone or computer and used to manage assets directly from the device.
• Cold wallets work offline and are therefore considered the safest option. They are suitable for those who store crypto for a long time. Cold wallets also come in different types. The most popular option is hardware devices such as Ledger or Trezor, which resemble a USB flash drive and are reliably protected from hacking. There is also a simpler method: paper wallets, which consist of a printed key or QR code that will be safe if the paper itself is stored correctly.

Depending on who controls the private keys, there are:

• Custodial wallets are managed by a third party (e.g., an exchange). This is convenient for beginners: no need to mess around with private keys. But the downside is obvious—your cryptocurrency is not entirely under your control.
• Non-custodial wallets—here you have complete control over your private keys. Safer, but requires discipline: if you lose your keys, you lose access to your crypto.

To put it simply: hot custodial wallets are about convenience, while cold non-custodial wallets are about reliability.

Criteria for choosing a reliable wallet

Once you have decided which type of wallet is right for you, it is important to check the specific characteristics:

• Security. Support for 2FA, multi-signature, backup, and normal encryption.
• Convenience. An intuitive interface and mobile version — so you can work without any hassle.
• Cryptocurrency support. Make sure the wallet works with the coins you need.
• Integrations. Connectivity to DeFi, Web3, NFT platforms, and the ability to participate in staking or use smart contracts.
• Flexibility. Support for APIs and extensions if you plan to use the wallet for business or more complex tasks.

“In general, when choosing a blockchain wallet, it all comes down to your goals. If you want to quickly turn over assets, go for a hot wallet. If you need maximum protection for your savings, go for a cold wallet. If you value complete control and are not afraid of responsibility, choose non-custodial solutions. But whatever option you choose, be sure to follow the security rules,” notes Yevhen  Kasyanenko.

Blockchain wallet security: key rules

In crypto, there is no “bank support service” that will return your money if something goes wrong. Here, the protection of funds depends solely on the user. That is why wallet security is a key factor in the safety of digital assets.

Here are a few rules to follow.

Use hardware wallets

The best way to protect your crypto from hacks is to keep your keys offline. For this purpose, there are hardware wallets such as Ledger or Trezor. They look like a regular flash drive, but they store your private keys inside. Even if your computer is infected with a virus, your keys will not be compromised: the device simply signs the transaction internally and does not transfer the data outside.

Storing your recovery phrase

Along with your wallet, you receive a seed phrase — a set of words that you need to restore access. It’s like a key to a spare door, and you need to handle the phrase with extreme care:

• Don’t store it in notes, screenshots, or the cloud — only offline.
• The safest way is to write the seed phrase on paper or save it on a metal plate so that it does not get erased or lost.
• The seed phrase is the key to all your funds, so do not show it to anyone: if even one person finds out, you will lose access to your crypto.

The dangers of phishing and fraud

Phishing is one of the most popular methods of fraud. Fraudsters make copies of popular wallet websites and applications and wait for you to enter your details yourself. To avoid falling victim to this:

• always check the website address (URL) before entering anything important;
• only download applications from official websites and stores;
• ignore emails and messages asking for your private key or seed phrase.

Two-factor authentication (2FA)

2FA is an additional level of security that prevents access to your wallet, even if your standard password is compromised. When logging into your wallet or sending funds, you will need to confirm the action with a code from an SMS, email, or special app.

Important: It is better not to use SMS, as they can be intercepted. Apps such as Google Authenticator or Authy are much more reliable.

“In crypto, security starts with habits. It’s not so much the wallet itself that matters, but how you store your seed phrase and which websites you visit,” emphasizes Yevhen  Kasyanenko.

How KISS.software helps clients work with blockchain

At KISS.software, we have long been exploring blockchain not only in theory, but also in real-world projects. Under the leadership of Yevhen  Kasyanenko, our team helps companies and private clients implement solutions that make working with crypto safe and convenient.

What exactly do we offer:

• We make custom wallets — not a template for everyone, but a solution for the specific tasks of your business.
• We think about security – we use modern cryptographic tools and proven practices to protect assets.
• We connect Web3, NFT, and DeFi – the wallet becomes not just a storage facility, but a full-fledged working tool.

If you need a wallet that is convenient, reliable, and tailored to your business, write to us and we will discuss the task.