What is a Digital Wallet?
A digital wallet is an electronic device that is used for electronic transactions. This can include online purchases with a computer or a smartphone. A bank account can be linked to a digital wallet. Customers can include additional information like their driver’s license, shop card(s), health card, and other IDs stored on the phone. One of these credentials are usually needed to verify credit card transactions and can be passed to a merchant’s computer terminal wirelessly via near field communication (NFC). Digital wallets were originally made not just for purchases and other financial transactions but also to authenticate the person's credentials. For example, a digital wallet can be used to verify the age of a buyer at a store when purchasing alcohol. The system has already gained popularity in Japan, where digital wallets are known as "wallet mobiles".
A digital wallet in the context of cryptocurrencies is a digital wallet where private keys are stored for digital currencies like bitcoin.
A digital wallet has both a software and information component. The software provides security and encryption for the personal information and for the actual transaction. Typically, digital wallets are stored on the client side and are easily self-maintained and fully compatible with most e-commerce Web sites.
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What is a Private Key?
In an asymmetric key encryption scheme, anyone can encrypt messages using the public key, but only the holder of the paired private key can decrypt. Security depends on the secrecy of the private key.
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A private key in cryptocurrency space is a secret number that allows coins to be sent to another wallet. Every digital wallet utilizes one or more private keys, which are included in the wallet file. Each private key has a mathematical relationship with all wallet addresses generated for the wallet.
A private key is a tiny bit of code that is paired with a public key to set off algorithms for text encryption and decryption. It is created as part of public key cryptography during asymmetric-key encryption and used to decrypt and transform a message to a readable format. Public and private keys are paired for secure communication, such as email. A private key is also known as a secret key.
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The private key is the "ticket" that allows the user to transfer coins so it is extremely important that these keys are kept secure. Private keys are usually kept on computer files, USB drives or even on paper, in cases where they're short enough to be printed and typed.
What is a Public key?
Public key cryptography is also called asymmetrical cryptography. In a cryptographic system that uses pairs of keys, there are public keys which may be widely disseminated, and private keys which only the owner can keep. This accomplishes functions of authentication where any person can encrypt a message using the receiver's public key but the resulting encrypted message can only be decrypted and read with the receiver's private key.
Why is MyEtherWallet Secure?
MyEtherWallet is not the same as other traditional digital wallets because other web wallets keep your private keys online in their servers. If you're using MyEtherWallet, you control your Ethereum’s private key on your machine.
This wallet is open-source and they don't use any third-party servers where you can write and access smart contracts. You can also connect a hardware wallet such as Trezor or Ledger Nano S to access your funds in MyEtherWallet's software interface.
MyEtherWallet never transmits, receives or stores users' private keys, passwords, or other account information. When you create an account with them, you are generating a cryptographic set of numbers: your private key and your public key (wallet address).
The handling of both keys happens only on your computer, inside the browser. They do not charge any transaction fee. You are simply using their interface to interact with the blockchain directly. This means that hackers would need to hack specifically into your computer if they want to get a hold of your private key, or they would have to trick you into giving them your private key. You will be completely responsible for your money and the transactions you make. Just like any other wallet, if you send your private key to someone, they will have full control of your account.
Another good thing about MyEtherWallet is it educates every new user about the basics of the technology behind it. They insist on the user reading a few slides with important security measures and even the basics of blockchain technology before proceeding with the registration process.
I really appreciate the educational prompts and the disclaimers. They’re well-intended for everyone to be able to secure their private keys because it’s technically the only entry-point for any thieves to steal. Attacks are mainly phishing attacks since private keys are handled by their respective owners.
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MyEtherWallet even developed a Chrome Browser extension that not only allows you to create wallets but implements countermeasures against phishing attacks.
