In this blog I am going to discuss blockchain identity and what that consists of on the blockchain. It can be confusing, so hopefully this helps clarify some of the confusion.
What is blockchain identity you might ask? Well blockchain identity is similar to a social security card, bank account or drivers license. A wallet in this case is what establishes your identity on the blockchain. Lets break down some components that are contained in a wallet. A wallet has a private key, public key and wallet address. Private key: is a secret number that allows you to spend Bitcoin or Ethereum for example. Public key: is a publicly shareable key that cannot be used to spend bitcoin. Wallet Address: is a unique identifier for your wallet.
Now that we know what a wallet is lets break down the different type of wallets. Non-deterministic wallet: a wallet where private keys are generated from random numbers. Deterministic wallet: is a wallet where addresses, private keys and public keys can be traced back to their original seed words. Hierarchical Deterministic wallet: is an advanced type of deterministic wallet that contains keys derived in a tree structure. Each one of these wallets are used in certain situations. For example, if you have a web server that sells memes you would want to keep track of each transaction independently. To do this you would have to have a master public key and generate a sequence of sub-public keys, each connected with a transaction and put that on a public web server with no private keys. That would be an example of a hierarchical deterministic wallet.
The blockchain has many layers when it comes to interacting with it. The wallet is crucial because in order to make transactions on the blockchain you need a wallet, but in order to use the wallet you have to understand how it works. I think of the wallet as my personal account that I only have control over. If I lose the account information then I can't or nobody else can access that information. It will be loss forever. That is why it is vital that you store your seed words in several places and make sure that you keep up with that information. You are basically your own bank with full control of your assets.
I hope that this makes block identity more clear. I will be discussing more about blockchain soon.