Crypto Wallet
IntermediateA crypto wallet is a tool, either software or a physical device, used to store the private keys that give access to cryptocurrencies, allowing users to send, receive and manage their digital assets.
Cryptocurrencies are recorded on a blockchain, not stored inside the wallet itself. What the wallet actually holds is the private key, a secret code that proves ownership and allows the holder to authorise transactions. Anyone with the private key can control the funds.
Wallets come in several forms. Hot wallets are connected to the internet, such as mobile apps, desktop software or web-based wallets, and are convenient for frequent transactions. Cold wallets are kept offline, such as hardware devices that resemble USB sticks or keys written on paper, and are more secure against hacking.
Wallets can also be custodial, where a third party such as a cryptocurrency exchange holds the keys on the user's behalf, or non-custodial, where the user controls the keys directly.
For example, a long-term holder might keep most of their cryptocurrency in a hardware wallet stored safely at home, using a mobile wallet for small, everyday amounts.
Security is critical. If a private key or recovery phrase is lost, the funds are usually lost permanently. If it is stolen, the thief can take the funds, and transactions generally cannot be reversed. Custodial wallets depend on the exchange's security and solvency, and several exchange collapses have left customers unable to access their funds.
For worked examples and full lessons, visit notesbysara.org.