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I have a very basic question regarding wallets to which I haven't found a clear explanation online. From what I understand, a wallet (in its most basic form) is a piece of software that holds and/or generates key pairs. Modern wallets are initialized with a random seed (whose custody is the responsibility of the user) and then they're used to create deterministically new private/public key pairs that are recoverable with knowledge of the seed. I have some questions:

  1. After creation each key pair determines "abstractly" a new EOA (I say abstractly because there still doesn't exist an Ethereum address in the state tree which corresponds to that public key). The only thing it can do at this point is to receive money?

  2. Am I correct in saying that what a wallet does is to create lots of EOAs operated by the same entity/person?

  3. The main reason to create many EOAs is to protect privacy and not have all transactions be linked to the same individual?

  4. Apart from the capability of creating new pairs from seed, what is then the difference between a wallet and a keystore?

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When you type in a password for your wallet you encrypt the key in the keystore and can retrieve it to load your wallet again.

The wallet is created from the key stored. Once the key is decrypted you can you the wallet (real key) to sign transactions.

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  • Thank you for the answer. Could you expand a little bit on the questions listed in the initial post?
    – chris
    Aug 6, 2023 at 14:07

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