What is a crypto wallet? Private keys, seed phrases and addresses

What is actually in a wallet?

Despite the name, a wallet holds no coins. The coins live on the blockchain's ledger. The wallet holds the keys that let you spend them.

• Public address: like a bank account number. Share it and others can send you coins.
• Private key: a long secret number used to sign transactions. Whoever has it effectively owns the coins.
• Seed phrase (recovery phrase): a list of 12 or 24 English words that can regenerate all your private keys. It is the master key to your wallet.

Giving someone your seed phrase or private key is the same as giving them all your coins. No real company, support team or "admin" will ever ask for it. More in seed phrase safety.

Custodial versus non-custodial

Crypto has a well-known saying: "not your keys, not your coins." When the FTX exchange went bankrupt in 2022, the funds of more than a million customers were frozen, which showed exactly what it means.

Hot versus cold wallets

• Hot wallet: an app on an internet-connected phone or computer. Convenient, but exposed to malware, fake apps and phishing.
• Cold wallet: the keys stay offline, for example on a hardware wallet (a small dedicated device) or written on paper. Much harder to hack, but it can be lost or damaged.

Common wallet mistakes

1. Sending on the wrong network: the same token can exist on several blockchains (USDT does). Sending on the wrong one can lose the coins.
2. Copy-paste address errors: some malware swaps copied addresses. Check the first and last few characters before sending.
3. Photographing the seed phrase: if the photo on your phone or cloud is hacked, everything is gone.
4. Installing apps by name alone: fake apps often copy real names. See fake apps and phishing.

Key points

• A wallet holds keys, not coins.
• Your seed phrase is all your coins. Never share it or store it online.
• Keeping coins on an exchange means trusting that company.
• Blockchain transactions cannot be reversed.