[News Terms] 'Coin Wallet' for Storing Virtual Currency

Not a Physical Wallet but a 'Digital Wallet'
Protected by Strong Security Technologies like 'Blockchain'

Kim Nam-guk, a member of the Democratic Party of Korea, has become embroiled in controversy regarding the possession of virtual currency (coins). The coin wallet address believed to be owned by Kim and the transaction details of WEMIX coins have also been disclosed, but the suspicions are rather increasing.

Here, a 'coin wallet' is not a physical wallet that exists in reality. It is a 'digital wallet' that exists online. Coin users use this wallet to manage and store their coins.

What is the difference between a bank account and a coin wallet? A bank account consists of a bank name and numbers, but a coin wallet is composed of uppercase and lowercase English letters and numbers. To encrypt data and defend against attacks such as hacking, the English letters and numbers are in a long and complex form. Also, unlike a bank account, the coin user's name does not need to be registered to the address, so it is impossible to know whose coin it is just by looking at the address.

Bitcoin cryptocurrency model [Image source=Yonhap News]

When opening a coin wallet, an encrypted 'public key' and 'private key' are issued together. The public key can be seen as a bank account number. It is information that can be disclosed externally to trade digital assets.

The private key can be understood as the password of the account. Since the private key is used to access one's coin wallet, only the coin owner should know it. However, if the private key is lost, access to the coin wallet is impossible. Even if a person holding a large amount of coins dies, if the heirs do not know the private key of the coin wallet, they cannot withdraw coins from the wallet.

Coin wallets can be broadly classified into 'hot wallets' and 'cold wallets' depending on whether they are connected online. A hot wallet is a type of wallet connected to the network, allowing real-time transactions with other parties as long as the address is known. A cold wallet refers to a wallet that exists offline, disconnected from the internet. Since it stores coins on an external device, it is also called a hardware wallet. It is mainly used by coin investors concerned about hacking risks.

Photo by Korea Electronics and Telecommunications Research Institute website capture

Such coin wallets are based on Blockchain network technology, which strongly protects coins from hacking risks. Blockchain is a distributed data processing technology where blocks containing data are connected to each other. It is called blockchain because the connected blocks resemble a chain. A representative feature of blockchain is that rules are created by consensus among participants. Since there are many participants, for a hacker to hack it, they would have to quickly falsify all participants' blocks, making hacking practically impossible. Therefore, it is used as a security technology in various IT fields such as protecting coin wallets.