Crypto glossary

Wallet

A crypto wallet is software or hardware that manages your private keys. Your coins are not stored inside the wallet; they live on the blockchain, and the wallet holds the keys that let you prove ownership and sign transactions.

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What a wallet actually does

A wallet generates and stores private keys, derives your receiving addresses, shows your balances by reading the blockchain and signs transactions when you send funds. Because the coins themselves are recorded on the chain, you can restore the same wallet on another device from its seed phrase and everything reappears.

Many wallets also connect to decentralized applications, letting you approve swaps or other smart contract actions from the same interface.

Main types

Custodial wallets are run by a company, often an exchange, that holds the keys for you. They are convenient and offer password recovery, but you depend on the company's solvency and honesty. Non-custodial wallets leave the keys with you.

Hot wallets are connected to the internet, such as browser extensions and mobile apps; MetaMask is a well-known example. They are handy for frequent use but more exposed to malware and phishing. Hardware wallets, made by companies such as Ledger and Trezor, keep keys on a separate device and sign transactions there. Cold storage generally means keys that never touch an internet-connected device.

An example

Say you keep a small amount in a phone wallet for daily use and larger savings on a hardware wallet. If your phone is stolen, you lose access to the phone wallet's funds only if the thief can unlock it before you restore the seed phrase elsewhere and move the coins.

Common mistakes

Storing the seed phrase digitally, for example as a screenshot or in cloud notes; typing it into a website; downloading fake wallet apps; and approving transactions or token allowances you do not understand, which wallet drainers exploit. Always check the receiving address carefully, since some malware swaps addresses in your clipboard.

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Frequently asked questions

Are my coins stored in my wallet?

No. They are recorded on the blockchain. The wallet stores the keys that control them.

What is the safest type of wallet?

For larger amounts, a hardware wallet with a well-protected offline seed phrase backup is widely considered the safest option for individuals, but it still depends on careful use.

Can I use one wallet for different cryptocurrencies?

Many wallets support several blockchains, but not all. Sending a token over a network your wallet does not support can make it hard or impossible to access.

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All glossary terms · Educational reference only — not investment, legal, tax or financial advice.