Wallet
17/04/2026
A cryptocurrency wallet stores the private keys needed to control coins on a blockchain. The coins themselves never leave the chain — the wallet just holds the secret that lets you sign transactions from your address. Losing the keys means losing access to the coins; leaking them means anyone who copies them can spend the coins.
If you're looking for step-by-step instructions, see our guide How to create a cryptocurrency wallet.
Custodial vs non-custodial
- Custodial — a third party holds the keys for you. Exchanges like Coinbase, Binance, and Kraken are custodial: you log in with email and password, they sign transactions on your behalf. Convenient, but not your keys, not your coins — bankruptcies like FTX (2022) and Mt. Gox (2014) wiped out user balances.
- Non-custodial — you control the keys (or the seed phrase that generates them). MetaMask, Ledger, Trust Wallet, and Electrum are non-custodial. No one can freeze your funds, and no one can recover them if you lose the seed.
Mining pool payouts should normally go to a non-custodial address you control, not directly to an exchange deposit address you don't own outright.
Hot vs cold
- Hot wallet — online, connected to the internet (mobile apps, browser extensions, exchange wallets). Convenient for everyday use; larger attack surface.
- Cold wallet — offline (hardware wallet, paper, air-gapped machine). Used for long-term storage of larger balances.
A reasonable setup: small spending balance in a hot wallet, the bulk in cold storage.
Software vs hardware
- Software wallets — apps or browser extensions that store encrypted keys on your device. Examples: MetaMask, Phantom, Trust Wallet, Exodus, Electrum.
- Hardware wallets — dedicated devices that keep keys in a secure element and sign transactions internally, so the keys never touch your computer. Examples: Ledger (Nano S Plus, Nano X), Trezor (Model T, Safe 3, Safe 5), Tangem (NFC cards), Keystone, BitBox02, Coldcard.
- Paper wallets — printed keys or QR codes. Largely obsolete: error-prone at creation and at spending time; mostly replaced by hardware wallets with metal seed backups (Cryptosteel, Billfodl).
Seed phrase and derivation paths
Modern wallets use BIP-39 seed phrases: a 12- or 24-word mnemonic encoded from entropy plus a checksum. The same seed reproduces the same addresses in any BIP-39-compatible wallet, so you can recover funds in a different app if your original wallet stops working.
BIP-32 / BIP-44 define derivation paths — a tree of addresses generated from one seed: m/44'/coin_type'/account'/change/index. Bitcoin uses coin_type 0, Ethereum uses 60, Solana uses 501.
Common mistakes
- Storing the seed as a photo, cloud note, email draft, or synced password manager — compromised repeatedly
- Entering the seed into a "wallet support" site — legitimate wallets never ask for your seed
- Sending BTC to an ETH address (or any chain-mismatch) — funds are usually unrecoverable
- Not verifying the receive address on the hardware wallet screen — clipboard-hijacking malware swaps addresses silently
- Skipping a test transaction before enabling a new payout address on a mining pool
