What is a crypto wallet

A wallet stores keys, not coins

A crypto wallet doesn't actually store coins. Instead, it's software or sometimes a physical device that keeps your private keys safe. These keys give you the ability to send coins from your blockchain addresses, but the coins themselves remain recorded on the blockchain, not in your wallet. When you want to move your crypto, it's the wallet that proves you have the right to do so, by signing with those private keys (which are just long strings of characters).

So think of a wallet as more like a keychain, not a safe box overflowing with coins. The coins are only entries on a ledger. If anyone else gets access to your private keys, they could transfer your coins. You'll see more about how these public and private keys work side by side in public key vs private key.

The main types of wallet

• App wallets: These are installed on your smartphone or computer, so they're usually convenient if you move coins often.
• Browser wallets: These wallets work as browser extensions. They're often chosen when you want to interact with decentralized apps through websites.
• Hardware wallets: These are separate physical devices, designed to keep your keys out of reach of online threats. The device itself signs transactions.
• Exchange accounts: Here, you don't control the private keys. The platform owns the keys, and you use its web or app interface.

And each type sets its own balance between convenience and how much control you keep. If you want more on the difference between holding your own keys or letting a third party keep them, see custodial vs non-custodial wallets.

What a beginner needs to start

To get going with a self-custody wallet, you'll need an app or a special device that matches the coins you want to use. Create your wallet, then make a copy of its recovery phrase, a set of words that lets you restore your wallet if something happens to your device (lost phone, damaged laptop, or theft). Store that phrase securely. Never show it to anyone and don't enter it on any websites.

Check first that the wallet can handle the specific coin or network you're using. If you're planning to store larger values, it’s important to learn about hot and cold wallets before making your decision.

A worked example of a first wallet

Here's an example: you install a wallet app on your phone and the app shows you a unique 12-word recovery phrase. You write these words down and put the paper in a locked drawer at home. After a friend sends coins to the address shown in your app, you see them appear. Sometime later, you lose the phone. You download the same wallet app on a new device, enter the 12-word phrase, and your balance appears, restored. (This is only an illustration; you should always test by restoring a small value first before entrusting larger amounts.)

Frequently asked questions