What is a Crypto Wallet?

A wallet is software or hardware that manages your cryptocurrency private keys. Despite the name, it doesn’t actually store cryptocurrency—your coins exist on the blockchain. The wallet stores the keys that prove ownership and allow transactions.

How Wallets Work

Basic Components

  • Private Key - Secret that signs transactions
  • Public Key - Derived from private key
  • Address - Public identifier for receiving (from public key)

Transaction Flow

  1. You initiate a send
  2. Wallet signs with private key
  3. Signature proves ownership
  4. Transaction broadcasts to network
  5. Blockchain updates balances

Types of Wallets

Hot Wallets (Connected to Internet)

Software Wallets

  • MetaMask (browser extension)
  • Trust Wallet (mobile)
  • Coinbase Wallet (mobile)
  • Rabby (browser)

Pros:

  • Convenient
  • Free
  • Easy to use
  • Good for active trading

Cons:

  • Less secure
  • Vulnerable to hacks
  • Malware risk

Cold Wallets (Offline)

Hardware Wallets

  • Ledger (Nano S, Nano X)
  • Trezor (One, Model T)
  • Keystone
  • GridPlus

Pros:

  • Most secure
  • Offline storage
  • Resists hacking
  • Best for large holdings

Cons:

  • Costs money ($60-250)
  • Less convenient
  • Can be lost physically

Paper Wallets

  • Private key printed on paper
  • Completely offline
  • Fragile
  • Not recommended anymore

Custodial vs Non-Custodial

Custodial (Exchange Wallets)

Someone else holds your keys:

  • Binance holds keys
  • Coinbase holds keys
  • Convenient for trading
  • Risk: Exchange can be hacked, freeze funds

Non-Custodial (Self-Custody)

You control your keys:

  • MetaMask, hardware wallets
  • Full control
  • Full responsibility
  • “Not your keys, not your coins”

For Ethereum & EVM Chains

  • MetaMask - Most popular browser wallet
  • Rabby - Better UX than MetaMask
  • Trust Wallet - Mobile, multi-chain
  • Ledger - Hardware, most secure

For Bitcoin

  • Ledger/Trezor - Hardware
  • BlueWallet - Mobile
  • Sparrow - Desktop, advanced
  • Electrum - Desktop, veteran

For Solana

  • Phantom - Most popular
  • Solflare - Alternative
  • Ledger - Hardware support

Multi-Chain

  • Trust Wallet - Many chains
  • Exodus - Desktop/mobile
  • Ledger Live - With hardware

Wallet Security

Best Practices

  1. Backup seed phrase - Write on paper, store safely
  2. Never share private keys - No one needs them
  3. Use hardware wallet - For significant amounts
  4. Verify addresses - Before sending
  5. Enable 2FA - On exchange accounts

Common Mistakes

  • Storing seed phrase digitally
  • Sharing screen with seed phrase
  • Clicking malicious links
  • Approving unlimited token spending
  • Not verifying transactions

Hot vs Cold: Which to Use

Use Hot Wallet For

  • Small amounts
  • Frequent transactions
  • DeFi interaction
  • Daily usage

Use Cold Wallet For

  • Large holdings
  • Long-term storage
  • Serious amounts
  • Maximum security
  • Hot wallet: Trading amount
  • Cold wallet: Savings
  • Exchange: Minimal, for trading only

Seed Phrase Backup

The 12/24 Words

Your seed phrase can recover entire wallet:

  • Write on paper
  • Store in multiple locations
  • Never photograph
  • Consider metal backup

What If Lost?

Without seed phrase + device failure = funds lost forever

Choosing a Wallet

For Beginners

  1. Start with exchange account
  2. Move to Trust Wallet/MetaMask
  3. Eventually get hardware wallet

For Active Traders

  • Hot wallet for daily use
  • Cold wallet for storage
  • Exchange for fast trades

For HODLers

  • Hardware wallet primary
  • Minimal hot wallet use
  • Exchange only when needed

Wallet Addresses

Multiple Addresses

One wallet can generate unlimited addresses:

  • Good for privacy
  • All controlled by same seed
  • Same security considerations

Address Formats

  • Bitcoin: Starts with 1, 3, or bc1
  • Ethereum: Starts with 0x
  • Solana: Long alphanumeric string

Connecting Wallets

To DeFi/dApps

  1. Click “Connect Wallet”
  2. Select your wallet
  3. Approve connection
  4. Can revoke anytime

Wallet Connect

  • QR code connection
  • Works with mobile wallets
  • Standard protocol

Recovery

Lost Password (Software Wallet)

  • Use seed phrase to restore
  • Create new password

Lost Hardware Wallet

  • Buy new device
  • Restore with seed phrase
  • Funds are safe if seed is safe