About crypto wallets¶

Crypto wallets come in many forms, from hardware wallets like Ledger (which looks like a USB stick) to mobile apps like Coinbase Wallet, Metamask wallet, Keplr wallet, etc.. which make using digital assets as easy as shopping with a credit card online.

How do they work?¶

Unlike a normal wallet, which can hold actual cash, crypto wallets technically don’t store your tokens. Your holdings live on the blockchain, but can only be accessed using a private key. Your keys prove your ownership of your digital money and allow you to make transactions. If you lose your private keys, you lose access to your money. That’s why it’s important store your keys safely.

Difference between forms of wallets?¶

Crypto wallets range from simple-to-use apps to more complex security solutions. The main types of wallets you can choose from include:

• Hardware wallets aka Cold wallets: Cold wallets are not connected to the internet and really all they do is store your private keys. You are responsible to store your hardware wallet in a safe place and is only connected to a computer when you want to use your tokens. The idea is to try to balance security and convenience. Hardware wallets are always non-custodial

• Online wallets aka Hot wallets: Hot wallets are also secured with private keys, but come in custodial and non-custodial forms.

  • Custodial Wallets are defined as wallets in which the private keys are held by a third party. Meaning, the third party has full control over your funds while you only have to give permission to send or receive payments. This is the case with many crypto exchanges. They often come with built-in wallets, meaning you can trade and store from a single interface and don't need to worry about key management.
  • Non-custodial wallets are software wallets that lets you be your own bank. This implies that users have full control over their assets and for which only you, have access to the private key.

Each type has its tradeoffs. Hardware wallets are harder for malicious users to access because they are stored offline, but they are limited in function and risk being lost or destroyed. Online wallets are the simplest way to get started in crypto and offer a balance of security and easy access.

If you want to be able to see in real-time what your assets are doing and want to keep up to date, a hot wallet is the way to go. If you just want to buy some tokens right now and hope to sell later for a nice profit, then a cold wallet or non-custodial hot wallets are the right option for you.

Whichever option you choose to go with, just make sure that you store your keys safely, and that you remember the passwords for your wallets. You don’t want to lose your digital assets because you forgot or misplaced your keys!

Check out our wallets guides to create your own non-custodial hot wallet!