It is common to use the term “wallet” to refer to the software that users use to manage their cryptocurrencies, but why shouldn’t we use this term?

When we use this term we can confuse new users who do not understand how Blockchain technology works, starting with something as simple as the fact that the coins are not stored in the software they use to manage them, but that these actually perform several tasks: checking balances (for which they depend on a Node), signing transactions (Signing device) and transmitting signed transactions to the network (Client).

It is important that users are aware of these terms so that they can understand and differentiate the different elements that exist when interacting with the network; understanding how it works can avoid problems such as loss of privacy or even loss of their coins.

Node

It is a device that runs the software that defines the consensus rules of the network protocol, validates that transactions are legits, chooses which transactions will be included in a block, and stores a complete copy of the entire transaction history of the network.

Some clients run a node themselves in order to avoid relying on third parties, but the majority of clients connect to third-party nodes to reduce the storage size required to be part of the network, which results in a considerable loss of privacy for the user.

Bitcoin Core, for example, is the main software used in the Bitcoin network.

Client

This is the software that most users of a blockchain network use to create new transactions, as well as to keep track of these and previously executed transactions. It communicates with the nodes of the network to check the necessary data to know the balance of coins of a user, as well as to transmit to the nodes a new transaction that has already been signed.

Most clients allows to store the private keys in them (something not recommended to do) and to sign the transactions qith this keys, in these cases they are called “Hot Wallet”, a name to avoid.

Sparrow Wallet, for example, is a client for the Bitcoin network that can act as a client only or also as a signature device and requires connection to a node (that can be run by the user himself or by a third party).

Signing Device

This term refers to the devices used to sign the transactions that a user has created from a client and wants to execute on the network; afterwards it is transmitted to the network via a Client. Most of them securely store the private keys.

Since these devices usually are independent of any Client and not connected to any network, they are often known as “Hardware Wallet” or “Cold Wallet “, a term to be abandoned since these devices are not wallets.

COLDCARD, Trezor or Ledger are some examples of Signing devices.

References

• bitcoinstack.info

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