Wallets

What a wallet actually holds

A wallet does not contain coins. Coins exist only as entries on a blockchain ledger. What a wallet stores is the private key that proves you control a particular address, plus the public key and address derived from it.

This distinction matters. Losing a wallet does not destroy your coins; it destroys your ability to prove they are yours, which amounts to the same thing in practice.

Custodial and self-custody

Custodial wallets hold the keys on your behalf. Exchange accounts work this way. They are convenient, recoverable if you forget a password, and dependent on the provider staying solvent and honest.

Self-custody wallets put the keys under your control alone. Nobody can freeze your funds, and nobody can restore them if you lose the keys.

The phrase "not your keys, not your coins" is the shorthand for this trade-off.

Hot and cold

Hot wallets stay connected to the internet: browser extensions, phone apps, exchange accounts. Convenient for regular use and exposed to whatever compromises the device.

Cold wallets keep keys on hardware that never touches the network, signing transactions offline. Slower to use, considerably harder to steal from remotely.

Many people run both: a hot wallet with small amounts for daily use, cold storage for the rest.

Seed phrases

Most wallets derive every key from a single seed phrase, typically twelve or twenty-four words. Anyone with those words has the funds. Writing them down on paper and storing them somewhere safe is standard practice; photographing them or typing them into a cloud service is not.

No legitimate wallet, exchange or support agent will ever ask for a seed phrase. Requests for one are always fraud.