Crypto Wallets Explained

What a wallet is doing on your behalf

Your coins live on the network's ledger, not inside an app. A wallet stores the private key that authorises spending from your addresses, and it signs transactions with that key. Most modern wallets derive every key from a single recovery phrase, which is why that phrase is the whole account rather than a password that can be reset.

Two questions follow from that, and they are the two decisions worth getting right: who holds the key — you or a company — and where that key is exposed, on an internet-connected device or on hardware that keeps it offline.

High-level questions these guides answer

• Do I need a wallet at all? If a platform holds your keys you are relying on that company's solvency and security; a self-custody wallet moves that responsibility, and the backup burden, to you.
• Is a recovery phrase the same as a password? No — it regenerates every key in the wallet, so anyone who reads it controls the funds, and nobody can reset it for you.
• Is a hardware wallet necessary? It matters most for amounts you would not want to lose to a compromised computer or phone.
• Can a wrong transfer be reversed? A confirmed transfer cannot be reversed by anyone, which is why address and network checks happen before sending.
• What happens if I lose the device? The device is replaceable; the backup is not. Recovery depends entirely on whether the phrase was written down and stored safely.

Where to start

If you are new, read what a wallet is, then the custody comparison, then seed phrases. Those three cover the decisions that are hardest to undo later.

If you already hold crypto, the two highest-value pages here are backup and recovery, and safe sending — they address the losses that happen most often.