Let's deal today with the first one or two terms for a relative new crypto adopter.
I want to own crypto. Where do I "keep" it?
Wallet
Real Life wallet :
The definition of a real life wallet is simple. A leather/textile material container, able to hold your your money (coins,paper) IN it. Physically.
To compare the real life wallet with a crypto "wallet" is wrong although most people do it by default.
Crypto wallet:
We often hear : "I moved my ETH from Metamask to MEW". That is a completely wrong phrase. It is just like thowing away gwei for nothing (miners are happy though).
In crypto we define a "wallet" as an interface to interact with the specified blockchain. The interface is able to interact with the blockchain using any private key of a public address or a mnemonic phrase (seed) that controls all the derived private keys. A wallet controls any address, you don't have to move funds between addresses used by a specified interface. You just have to import the wallet file, private key or seed into the desired interface.
A "wallet" can be online (serverside software), embedded into a node, a clientside software (an app that runs on your computer). Even a game or a dapp that interacts with the blockchain or a smart contract can be called a wallet as it is an interface communicating with it.
Blockchain technology is not only about sending block reward incentives (coins) back and forth, like playing table tennis with different addresses. The are many other type of packs that an interface can send (messages, signatures, etc).
Conclusion : You do not "keep" your crypto into a wallet. Crypto is a consensus of the network that you own that ammount of coins. It resides on the blockchain. You use the wallet to access it. You can use any wallet to do it as long as you have your private key of mnenonic seed.
What is the difference between private key and mnemonic seed?
The real life example:
Imagine that you have a real life wallet with different paper money in it. You have EUR and USD for example.
In order to be able to spend one piece of EUR paper you will need to read the series of the specific paper (which is written on it). That is a private key of that specific EUR paper. If you will read the series of USD paper and try to spend a EUR paper that won't be possible since the possibility to be the same series is very low. That's exactly how private keys work. One private key controls a ONE single signature address on the network.
We consider that only one bank printed also all the EUR papers and all the USD papers, hence it knows all the series of the coins. Basically, if a bank wants, it can spend any of your papers residing into your wallet since it knows all the private keys. That is the mnemonic phrase. Out of the mnemonic phrase you can derive all the private series of all your coins residing into your wallet. (That is an example where, by spending one EUR paper, you will give also ownership of the series, in crypto is different).
The crypto private keys/ mnemonic phrase
Private key : A series of characters that controls a single address on the blockchain network.
Mnemonic Phrase : A series of words in a specific order that can derive ALL of the private keys of your addresses.
*This tutorial is basic and it is designed for newcomers. There are many other things to be written about those 2/3 terms. Read, document yourself, always ask questions, do your own research.
As astrology, it has been said that crypto is a humbling and character-building experience. Give it time and understand it. Once you start to use it safely if will gain you the power of your own money.
To be continued....
Concorde.ro - Crypto Security Company
www.concorde.ro
