A crypto wallet does not actually hold "coins" inside itself. Assets always remain recorded on the blockchain, and the wallet only stores the keys that prove you own them and let you sign transactions.
Main components#
- Public key and address: like an account number that you can give others to receive funds
- Private key: like the full password to the account, which must never be revealed
- Seed phrase: a set of words that lets you restore the wallet on another device
Types#
A hot wallet is connected to the internet and is easy to use, such as a mobile app or browser extension. A cold wallet is kept offline and is more secure. Wallets are also either self-custodial (you hold the keys) or custodial (for example, an exchange holds the keys).
Example#
If you write down the seed phrase in a wallet app, you can regain access to your assets with those same words even if you lose your phone.
Security warnings#
- No genuine support team will ever ask for your seed phrase
- Fake wallet apps and extensions are plentiful; install only from the official source
- If you lose both the key and the seed phrase, the assets cannot be recovered
- Read the address and amount carefully before approving any transaction or permission