Crypto wallet

Despite the name, a crypto wallet does not hold coins. Crypto assets exist as entries on a blockchain, and a wallet stores the private keys, long secret numbers that prove ownership and are used to sign transactions moving the assets elsewhere. Each key has a matching public address that others can send funds to. Most wallets generate keys from a recovery phrase, or seed phrase, of 12 or 24 words, which can restore the wallet on another device. Hot wallets, such as phone apps and browser extensions, are connected to the internet; cold wallets, such as dedicated hardware devices or paper backups, keep keys offline.

The key distinction is custody. With a custodial wallet, such as an account at a crypto exchange, the provider holds the keys and you rely on it staying solvent and honest; several exchanges have failed or been hacked, and customers lost funds. With a non-custodial wallet, you hold the keys yourself: anyone who obtains your recovery phrase can take everything, and losing it without a backup means permanent loss, with no password reset. Scams often target recovery phrases through fake support staff or websites. Whatever the wallet, crypto assets are high risk and can lose all their value; wallet security protects against theft, not against price falls.