Both these are necessary for crypto trading and therefore it is important that you know about the differences between these two terms.
You may do some research on these two terms on the internet to know more but the easiest way to learn about them is to go through an article like this one. It will save a lot of your time and effort on research.
In this article, you will find all those aspects in which a crypto address and a crypto wallet differ and you will also come to know about the usefulness of each of these things through the ‘Which is more useful’ section.
This enhanced knowledge will enable you to know how useful a crypto address and a crypto wallet is to a trader and how each of these meets your crypto trading needs. You will also know how exactly you can create them when desired.
8 Differences Between Crypto Address and Crypto Wallet
Ideally, a crypto wallet and a crypto address both differ in different aspects right from their creation to the purposes solved.
Here are a few of those aspects enlisted for your knowledge.
1. Basic Differences
On the other hand, a crypto wallet is a set of private keys. All these keys are corresponding to a particular crypto address. A crypto wallet is actually a program that controls the crypto address and helps in making transfers to and from the crypto address.
With a few more simplistic analogies you will be able to understand the differences between a crypto address and a crypto wallet more clearly.
A crypto address is just like a key and a crypto wallet is just like a key ring that contains that particular key.
Though it represents a public key, these crypto addresses are not the same thing. Generally speaking, the crypto addresses represent arbitrary scripts and not just a set of public keys.
On the other hand, the concept of a crypto wallet is usually found existing in Bitcoin clients only. It is typically an abstract form of a ‘key ring.’ This particular concept involves over and above the Bitcoin clients. It includes paper wallets and brain wallets.
The owner of the key pair of a crypto wallet uses the private keys to make a transaction which includes sending messages to prove ownership as well as to sign transactions.
This means that a valid signature can only be created with the use of the correct private key. This signature is then verified by anyone by using the related address, which, once again, symbolizes the public key.
On the other hand, the Bitcoin client software usually abstracts the crypto wallet for the user. In the process, it checks each of the crypto addresses enclosed in the crypto wallet.
It is also used to check the balances and transaction outputs related to the blockchain with them and add up the funds to represent them as one total balance. These balances are however stored in the blockchain publicly.
You will need a crypto wallet or a private key to spend your crypto holdings from a crypto address. Ideally, you will need an offline crypto wallet to store your crypto assets safely.
On the other hand, a crypto address is needed only when you receive crypto coins. These addresses are typically meant to be used only once and provided to the senders. For each transaction, receivers generally should generate an exclusive, single-use crypto address.
As for a crypto wallet, it represents a hash of a public key. These are all pairs of several different asymmetric keys. All these private and public key pairs are generated randomly for the user.
A wallet usually comes with an address, by default, but this is not the same as a crypto address. Instead, it is a collection of lots of number characters and random letters which correspond to the respective address.
As for the cryptocurrency addresses, these are all private keys. These addresses can be for Bitcoin, NEO, Ethereum, Litecoin, and basically any other crypto coins.
You need to keep these keys private, just as the name indicates. And, just like a physical key, you can copy a crypto address on your computer.
7. Types or Formats
You can choose to have any one or several types of crypto wallets such as:
- Software wallets which include web wallets, desktop wallets and mobile wallets
- Hardware wallets which look much like a USB drive and
- Paper wallet which is a document that contains all the data necessary to access your crypto holdings.
On the other hand, you will get a Bitcoin address in any of the three following types such as:
- P2PKH or Pay to Public Key Hash crypto address which is the oldest type of legacy format and starts with the number 1
- P2SH or Pay to Script Hash crypto address which is newer and slightly more complicated than P2PKH crypto address format and starts with the number 3 and
- Bech32 Segwit crypto address which is the latest and most advanced as compared to the other two types of crypto addresses and starts with bc1.
As for the formats, that of the crypto wallet is a text file created stereotypically on a disk. However, these files may differ according to the different clients. It may have quite a few important features such as address labeling and encryption.
8. Steps to Create
You can create a crypto address and a crypto wallet very easily by following a few simple steps.
In order to create a crypto address, you will first need to choose a provider and download their app on your computer.
Then you should create a strong password, create a new wallet, create a secret phrase, go through the safety notice, receive and check your secret phrase and you are done.
On the other hand, the steps to follow in order to create a crypto wallet will differ according to the type of wallet you want to use.
If you want to use a hosted wallet, all you have to do is choose a reliable platform, create your account and go through the verification process.
And, if you want to use a hardware wallet, you will need to set it up after you buy it by installing the software that comes with the wallet or by downloading it from the official website of the manufacturer of the hardware wallet.
After that, all you need to do is follow the on-screen instructions to set up the wallet.
Which is More Useful – Crypto Address or Crypto Wallet?
For a crypto trader, both these are equally useful. In simple terms, a crypto wallet is that which contains a collection of different crypto addresses. In contrast, a crypto address represents a place where the users can send Bitcoin to and from.
In terms of the respective terminology, one of them sends or receives Bitcoin to or from an address. In comparison, the other encrypts, backs up, exports, and imports the wallets of the users.
Typically, a crypto wallet is not the same as your physical wallet since it does not hold your money. It simply represents the balances in it and allows you to spend from it.
Going by the basics of a crypto wallet, if you consider a deterministic wallet, all the keys are the derivatives of a passphrase.
This passphrase is a master key, a particular seed, or a password and not a random seed. In the cryptographic sense, this matches up to a key ring, as said earlier.
To use a crypto wallet, all you need to do is open it and access any one of the addresses saved inside it. It is just like entering your house.
Once you do you can access any room that you want. A crypto wallet can be on your computer, in the browser, or on a physical device.
On the other hand, typically, you can create a new address for every payment you receive, which, ideally, is a good practice.
This means that you can have a lot of crypto addresses belonging to only one particular crypto wallet. This will make it very easy to split up all of the transaction outputs into different addresses.
Now, there are different types of crypto wallets available out there for you to use, as said earlier. Each of these types of crypto wallets offers different types of benefits to the users.
For example, if you have a physical wallet you will have access to both the private as well as the public keys. You will be the only owner of your coins and no one will be able to access your wallet.
On the other hand, if you have an online wallet in the crypto exchange, you will have access to only the public key or the Bitcoin address when you want to send and receive funds.
This access will be granted to you via password or PIN linked with your mail ID. These private keys are typically controlled by the crypto exchange.
In the end, to summarize it all it can be said that, a crypto wallet is:
- That which represents a set of public and private keys
- That which allows the users to sign transactions
- That which lets the users to prove their ownerships and
- That which helps in adding new transactions to the blockchain.
On the other side, a crypto address is that which represents a hash that is derived from the public key. It is that which allows the users to send and receive funds to and from other wallets.
In plain and simple words, a crypto wallet is that which stores your crypto assets but a crypto address is a place where you can send your crypto coins or receive them. However, there are other differences between them as listed in this article.