Blockchain technology is revolutionizing the way we interact with money, the financial system and even digital art. If you’ve heard of Bitcoin, Ethereum or NFTs, you’re probably interested in understanding more about how blockchain works. In this article, we’ll explore basic blockchain elements such as wallets, private keys, gas, transaction explorers and more. With this knowledge, you’ll be able to interact with the blockchain more securely and make the most of its functionalities.
What is a Wallet?
Definition and Functionality
In the context of blockchain, a wallet is a digital application or device used to store, send and receive digital assets. Unlike a physical wallet, a blockchain wallet does not directly store cryptocurrencies; it holds the private keys that allow you to access these assets on the blockchain. We can think of the wallet as the interface for accessing the digital funds registered on the blockchain.
Types of Wallets
There are several types of wallets, each with different features and security levels. Let’s take a look at the two main categories:
- Custodial Wallets
These are wallets where a third party (such as an exchange) keeps the private keys for you. It’s similar to a bank holding your money: you entrust your keys to an external entity, which can be more practical, especially for beginners. However, this approach has its risks, as you are putting your trust in a third party.
Examples: Coinbase, Binance Wallet. - Non-Custodial Wallets
In non-custodial wallets, you directly control the private keys, which means that only you have full access to the assets. Although this type of wallet requires more responsibility in terms of security, it offers more freedom and control over the funds.
Examples: MetaMask, Trust Wallet, Ledger Nano.
These two types of wallets can be found in application format (for desktop and mobile) or in hardware (physical devices, such as the Ledger and Trezor wallets).
Understanding Private Key and Security
What is a Private Key?
The private key is the main security mechanism within the blockchain. Each wallet has a unique private key, which is essentially a long string of randomly generated characters. This key allows the owner of the wallet to sign transactions and move the assets it contains.
Example: Imagine that the private key is a password that allows you to withdraw money from a bank account, but without this password, no one, not even a bank, can access it.
Private Key Security and Care
Keeping the private key secure is essential, because if it is lost or compromised, you also lose access to the assets. Here are some recommendations:
- Offline storage: Avoid storing your private key on devices connected to the internet. Hardware wallets, such as Ledger and Trezor, offer a secure solution as they keep keys offline.
- Use of the Seed Phrase: Most wallets provide a seed phrase (usually 12 or 24 random words) that can be used to retrieve the private key. Store this phrase securely.
- Don’t Share the Private Key: Sharing the private key is like handing over the key to the safe. Only the owner of the wallet should know it.
Difference between Private Key and Seed Phrase
The private key is unique for each transaction and wallet, while the seed phrase serves as a universal backup to recreate all your private keys and regain access to the wallet. Keeping the seed phrase safe is essential in the event of device loss or technical failure.
What is Gas and How Does It Work?
Definition of Gas
In the blockchain universe, gas is a fee that covers the cost of carrying out transactions and executing smart contracts. This fee is necessary to compensate the miners and validators who process these transactions, ensuring that the blockchain network works in a decentralized and secure way.
Example: Imagine that each transaction is like driving a car. Just as you need fuel (gasoline) to get around, on the blockchain, you need gas to move assets or perform actions.
How is Gas Calculated?
Gas is calculated in smaller units, called gwei (in the case of the Ethereum network), which represent a fraction of an ether (ETH). The total cost of gas depends on two main variables:
- Amount of Gas Required: Each operation has a fixed cost in gas, determined by the complexity of the action. Simple transfers cost less gas than complex smart contract executions.
- Gas Price: The price of gas fluctuates with supply and demand. At times of high demand, the cost of gas can rise, making transactions more expensive. Similarly, when demand is low, the price of gas tends to fall.
Example of Practical Application: On networks like Ethereum, a simple transfer can cost around 3 dollars, while the execution of a complex contract can exceed 1000 dollars ETH, depending on the situation on the network.
How to Reduce Gas Costs?
To save on gas costs, you can wait for times when the network is less congested. In addition, alternative networks such as Binance Smart Chain and Polygon offer lower fees compared to Ethereum.
Transaction Explorer: What is it and How to Use it?
What is a Transaction Explorer?
A transaction explorer is a tool that allows you to check the status of a transaction, wallet balance, fees paid and much more. It works like a “Google of the blockchain”, where you can enter the address of a wallet or the hash code of a transaction to get information.
Example of Popular Explorers:
- Etherscan: Used to query transactions on the Ethereum network.
- PolygonScan: Similar to Etherscan, but for the Polygon network.
- BscScan: Binance Smart Chain transaction explorer.
Main features
Transaction explorers have features that help you understand and verify blockchain data. Let’s explore some of them:
- Transaction History: Shows all transactions sent and received by an address, helping to track movements and check the current balance.
- Checking Tokens and Balance: In addition to the main balance (e.g. ETH), you can check the balance of specific tokens in the wallet.
- Verification of Smart Contracts: In networks such as Ethereum, smart contracts registered on the blockchain are also visible, enabling audits and security checks.
Practical example of using Etherscan
Imagine you’ve sent ETH to a friend and want to check that the transaction was successful. Simply access Etherscan and enter your wallet address or the transaction hash. You’ll see the status of the transaction (pending, confirmed or failed), the amount transferred and the gas paid.
Conclusion
Understanding the basic elements of blockchain – wallets, private keys, gas, transaction explorers and smart contracts – is essential for interacting safely and efficiently with this technology. These elements provide the tools to move assets, explore transactions and even create unique digital assets.
By understanding these components, you’ll be able to get more deeply involved in the blockchain universe and take advantage of the innovations this technology offers. Explore safely and always remember to take the appropriate measures to protect your private keys and interact with wallets and smart contracts responsibly.