A traditional wallet is a means whereby you can usually keep your physical cash/cards inside semi-securely for easy access.
"Wallet services" more recently (such as Skrill, Google Checkout, Paypal) are virtual equivalents of this - wherein you deposit your funds into their systems, and can then use their services to withdraw or spend your funds.
Crypto-Wallets operate similarly, but are fundamentally different.
Before we can go into this however, we need to discuss "Addresses"
In our previous article we wrote about how Alice would Pseudonymously receive our Credits by means of a "Vertcoin Address" - and that it was this address that was published publically and voted on in each round.
These addresses are to be thought of like mailboxes, but they're not hosted on a particular server, or even cloud farm (such as Gmail or Outlook) but rather they are a filtered Transaction log of the entire vertcoin transaction history, that identifies all voted transactions that have involved this address.
Using "Asymmetric Encryption" (see previous article for details), an Address has two parts. A "public key", and a "private key". The public key is what is actually shown as the address, this is what Alice would have given us to send our credit to. The private key is what she would have kept safe.
Essentially, the Public key lets us identify particular transactions in the "block-chain" ( the block-chain refers to the entire history of all vertcoin transactions that have been voted for in each round).
Be advised, you can send vertcoin to any syntactically valid address (in the same way you could send a letter to a non-existent address) - doing so will mean you will forever lose the vertcoin amounts that you send, so be very careful that you ensure that the address you are sending your vertcoin to is valid. Alice is not going to be paying you back for incompetance.
As stated in our previous article, to send credits, we need to be able to digitally sign and prove that we own the credits. This means that we need a Private key for a vertcoin Address that contains the vertcoin we want to send.
Be advised, without the private key to an address, there is No way to transfer vertcoin out of that address - so if you lose it, those vertcoin are gone forever. To add insult to injury, so long as you have the public key, (the address itself) you can still send further vertcoin to that address, and/or check on how much vertcoin has been lost, as the address itself isn't "gone".
Thinks of these addresses not as postboxes that you can destroy or lose. Think of them as indestructible boxes that have unbreakable glass around them, that allow you to peer inside and see the contents, but without the key - are useless.
If you lose the key, the box is still there, but no-one can open it.
A crypto-wallet is just simply a collection of the private and public keys for vertcoin addresses.
As stated in our previous article, Alice could have an [almost] unlimited number of vertcoin addresses, one for each transaction or whatever. Each address has its own unique public and private key.
A crypto-wallet therefore is more like a key-ring than a wallet - it contains all of the keys.
Therefore, if you lose your crypto-wallet, and you haven't backed it up, you lose all the keys that access all those money boxes. BE WARNED.
To put this in other terms:
Your money is stored in "vertcoin world", locked inside unbreakable boxes that you own the keys to. Your keys are on your keyring (or keyrings if you have more than one wallet), and while anyone in the world can look in the boxes they:
In short: Don't lose the keys!
In closing: The BBC ran a story of a man who threw out his computer hard-drive "containing millions of pounds of Bitcoin" - technically this is semi-true.
The hard-drive would have most likely had a copy of the entire block-chain on it of all Bertcoin transactions, which would have contained the digital signatures to prove that the hard-drive's owner had several millions of pounds of Bertcoin - but really, the only relevant information needed from the hard-drive was the keys on the keyring. The block-chain will survive on all the other computer systems out there currently voting, his addresses will survive, and can be looked up on blockchain.info if they are known. But his private keys were only ever in that one place, and if they can't be found, then his Bitcoin are effectively lost.