What Is A Crypto Wallet?

Use a crypto wallet to store and access crypto securely. Or send, receive, and spend crypto directly using a compatible wallet.

A crypto wallet allows users to store, access, and manage their crypto funds. There are many different types of crypto wallets to choose from, but chances are, if you own cryptocurrencies, you already have a crypto wallet. In this article, we’ll outline the different types of wallets and help determine which type is right for you.

Key Takeaways

  • Crypto wallets allow users to conveniently store, access, and manage their cryptocurrency funds.
  • One common misconception about crypto wallets is that they physically or digitally store funds within the wallet itself. Instead, crypto wallets provide a user-friendly interface and features that allow users to interact with compatible blockchains, where crypto funds are actually “stored”.
  • There are many different types of crypto wallets, but most can be grouped into two categories: hot wallets and cold wallets.

Crypto Wallets Explained for Beginners

Unlike a traditional wallet, crypto wallets don’t actually store funds, either physically or digitally. Instead, crypto funds are digitally stored on the blockchain, where they reside in blockchain addresses that mark the location on the blockchain where funds can be sent or retrieved.

Crypto wallets simply give users convenient access to their funds, by generating public keys, private keys, and wallet addresses that allow users to interact with cryptocurrency blockchains in an intuitive and user-friendly way.

How Do Crypto Wallets Work? Public Key, Private Key, and Wallet Address Explained.

  1. Public keys usually come in the form of a string of cryptographic code that users can share with others in order to receive cryptocurrencies. Think of it like a geographic coordinate that you can send someone to share your location, in lieu of your street address.
  2. Wallet addresses are essentially an abbreviated version of a public key, one that is shortened into an alphanumeric string or QR code. If public keys are like a geographic coordinate, a wallet address is similar to a street address, which is easier to remember and share.
  3. Private keys should never, under any circumstances, be shared publicly. Private keys consist of an alphanumeric string that is mathematically derived from the public key. Without diving into complexities, private keys allow users to access, manage, and send their crypto funds. Private keys are like the code used to access the safe where valuables are stored. Anyone with the private key can access and control your funds. Keep private keys in a secure location, because once they’re lost, it can be impossible to recover funds stored in the corresponding wallet address.

Types of Crypto Wallets

There are several different types of crypto wallets grouped into two main categories: hot wallets and cold wallets. We’ll outline some of the most common types and what their benefits and drawbacks are.

  1. Hot wallets, which include web-based wallets, mobile wallets, or exchange wallets, are wallets that online cryptocurrency exchanges typically offer. They are always online and easily accessible using a web browser or mobile device. Most consumer-friendly digital asset exchanges offer some combination of hot and/or cold wallet storage solutions, which we’ll cover later in more detail. Popular hot wallets include Trust Wallet or MetaMask.
  2. Cold wallets, which include hardware wallets, cold storage, or offline storage, are physical wallets that “hold” crypto offline. In many scenarios, cold wallets offer superior security compared to hot wallets, as private keys and other sensitive information is stored offline. However, cold wallets can be misplaced due to user error, stolen, or damaged beyond repair. Cold wallet solutions range from incredibly sophisticated wallets held in secure vaults, to high-quality consumer-grade hardware wallets, to “paper wallets” that simply consist of a QR code or alphanumeric strings printed or written on paper.

For those looking to evaluate their crypto wallet options in more detail, click the following link to learn more about Digital Asset Custody: What are Hot and Cold Wallets?

How To Set Up A Crypto Wallet

Looking for a secure, reliable, and easy-to-use crypto wallet? Create your free Binance.US account to store and manage your funds with the Binance.US multi-crypto wallet, compatible with many of the world’s most popular cryptocurrencies.

Download the Binance.US app to trade on the go: iOS | Android

Legal disclaimer: This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or advice; and (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice, we make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.

Share this article: Link copied to clipboard!

You might also like...

What Are NFTs?

What Is A Proof-of-Attendance-Protocol (POAP)?

What Is Blockchain?