Crypto wallets, explained

A wallet holds keys, not coins

Your coins always live on the blockchain. A wallet stores the private key that proves you can move them, and shows you a public address that others can send to. Whoever holds the private key controls the coins.

Most wallets give you a recovery phrase of 12 or 24 words. Anyone with those words can take everything, and if you lose them, nobody can reset them for you.

Custodial vs self custody

With a custodial wallet, such as an account on an exchange, the company holds the keys. It is convenient and you can reset your password, but you depend on that company staying honest and solvent. Mt. Gox in 2014 and FTX in 2022 are the famous cases where customers lost access.

With self custody, you hold the keys yourself in an app (a hot wallet) or a small hardware device (a cold wallet). You are protected from exchange failures but fully responsible for backups.

Basic safety habits

Never type your recovery phrase into a website or share it with support staff. Real companies never ask. Double check addresses before sending, start with a small test amount, and remember most blockchain transactions cannot be reversed.