Each time a user runs a cryptocurrency wallet for the first time a public-private key pair gets generated. The private key is a randomly generated number which allows users to transact over the blockchain. It is locally stored and kept secret. Each time a Bitcoin gets sent a private key has to sign the transaction. This action is automatically executed by the wallet software. When a wallet asks users to do a backup what this means is that the users must secure their private key. There are different types of wallets such as online wallets, mobile wallets, desktop wallet, hardware wallets or paper wallets. The category of each wallet is determined by where private keys are stored. Online wallets are mostly provided by exchanges and keep user’s private keys on their servers. If the service provider goes offline users would lose access to their funds. Hardware wallets for example store user’s private keys in a secure device which looks like a USB flash drive.

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