Crypto Wallet
A crypto wallet is software or a device that stores the private keys needed to access and send cryptocurrency recorded on a blockchain.
Despite the name, a wallet does not hold coins; they exist on the blockchain. The wallet holds private keys, secret codes that prove ownership and authorize transactions, and generates public addresses that others can send funds to.
Hot wallets are connected to the internet, such as mobile apps, browser extensions and exchange accounts. They are convenient for frequent use but more exposed to hacking. Cold wallets, such as hardware devices or paper backups, keep keys offline and are considered more secure for long-term storage.
Wallets are also custodial or non-custodial. With a custodial wallet, such as an exchange account, a company controls the keys for you. With a non-custodial wallet, you control them yourself, often through a recovery phrase of 12 or 24 words. The crypto saying 'not your keys, not your coins' reflects this difference.
Self-custody brings responsibility: if you lose the recovery phrase, the funds are usually gone permanently, and anyone who obtains it can take them. Legitimate services never ask for your recovery phrase.