This is an old revision of the document!
What is a cryptocurrency wallet?
A common misconception is that a crypto wallet “stores” your digital coins like a physical wallet stores cash. In reality, your cryptocurrency lives on the blockchain; the wallet simply stores the private keys (digital passwords) that allow you to access and move that currency.
Think of the blockchain as a giant wall of transparent glass lockers. Anyone can see what’s inside, but only you have the key to open your specific locker.
The world of cryptocurrencies can feel like the wild west. Markets can react to the slightest good or bad news, and new and innovative tech comes out every month. Transactions are immutable, stakes are high, and security threats are very real.
In all of this, one thing is constant: the importance of storing your digital assets properly and safely away from bad actors. It may seem a daunting task with a long list of common scams targeting crypto users. However, armed with the right knowledge and tools, you can keep your assets secure. Of course, the most important tool in crypto is the one you use to manage your assets and store your private keys – your wallet.
- Two Main Wallet Types: Hot vs. Cold
The most important choice you'll make is how “connected” your wallet is to the internet.
A general rule of thumb is to keep the bulk of your funds stored in a Cold Wallet. Some users opt to use multiple cold wallets for extra added security, but this is personal preference. Use your Hot Wallet to keep low amounts of your crypto funds for trading and smaller transactions. A good way to think about it is your Cold Wallet is your main bank account, and your hot wallet is the funds you keep on you in your pocket.
| Type | Connectivity | Pros | Cons |
|---|---|---|---|
| Hot Wallet | Always Online | Free, fast, great for frequent trading/DApps. | Vulnerable to hacks, malware, and phishing. |
| Cold Wallet | Offline | Extremely secure; keys never touch the internet. | Costs money ($50–$200), less convenient for daily use. |
- Custodial vs. Non-Custodial
This determines who is actually “holding” the keys to your funds.
- Custodial (Like a Bank): These are usually wallets on exchanges (e.g., Coinbase or Binance). The exchange holds the keys. If you lose your password, you can use “Forgot Password” to get back in. However, if the exchange goes bankrupt or gets hacked, your funds are at risk.
- Non-Custodial (Self-Custody): You are your own bank. You hold the Seed Phrase (usually 12 or 24 random words). If you lose this phrase, your money is gone forever—there is no customer support to call. But, no one else can freeze or touch your funds.
- Essential Concepts to Know
- Public Key (Your Address): This is like your email address or bank account number. You share this with others so they can send you crypto.
- Private Key (The Signature): This is your digital signature. Your wallet uses this to “sign” a transaction to prove you are the owner. You should never share this.
- Seed Phrase (Recovery Phrase): A human-readable version of your private key. If your phone or hardware wallet breaks, you enter these words into a new device to recover everything.
- Recommended Cold Wallet
- Recommended Hot Wallets
- Bitcoin (BTC):
- Wallet: Speed Wallet
- WAX (WAXP):
- Wallet: MyCloudWallet
- Solana (SOL)
- Wallet: Phantom Wallet