A crypto wallet is software or hardware that manages the private keys that give access to crypto assets on a blockchain. Despite the name, a wallet doesn't contain coins or tokens: those live on the blockchain. The wallet holds the keys that prove ownership and lets you sign transactions, view balances and connect to apps. Whoever controls the private key controls the assets.
How does a crypto wallet work?
- Key pair: the wallet generates a private key (secret) and a public key, from which the address is derived that others can send assets to.
- Seed phrase: most wallets back up all keys with a recovery phrase of 12 or 24 words. Anyone with this phrase can restore, and empty, the wallet.
- Signing: to send a transaction or call a smart contract, the wallet signs it with the private key; the network verifies the signature.
- Connecting to apps: wallets connect to web applications through browser extensions or protocols such as WalletConnect.
Types of wallets
- Custodial vs. non-custodial: with a custodial wallet, an exchange or provider holds the keys for you; with a non-custodial (self-custody) wallet, only you do.
- Hot wallets: connected to the internet, such as browser extensions (MetaMask) and mobile apps. Convenient for daily use.
- Cold wallets: hardware wallets (Ledger, Trezor) keep the keys offline on a dedicated device. Safest for larger amounts.
- Multisig wallets: require several signatures, for example two out of three, so one stolen key isn't enough. Common for company and DAO treasuries.
- Smart accounts: wallets built on account abstraction, with features such as gasless transactions, social recovery and passkeys.
Wallet security
Never share your seed phrase or enter it on a website; no legitimate party will ever ask for it. Check what you sign: many thefts happen through malicious signature requests rather than stolen keys, which is why clear, human-readable signing screens matter. Keep larger amounts in a hardware or multisig wallet. In the EU, companies that hold crypto assets in custody for customers fall under the MiCA regulation and need authorisation.
Building a wallet or wallet features into your product? See our crypto wallet development, hardware wallet integration and multisig wallets.
Frequently Asked Questions about Crypto Wallets
What happens if I lose my wallet?
If you have your seed phrase, you can restore the wallet on a new device. Without the seed phrase, the assets in a non-custodial wallet are lost for good; nobody can recover them.
What is the difference between a wallet and an address?
An address is like an account number that others can send assets to. A wallet manages one or more addresses and their private keys.
Is a hardware wallet necessary?
Not for small amounts, but it is strongly recommended for larger holdings, because the private key never leaves the device and can't be stolen by malware on your computer.
Can one wallet hold different cryptocurrencies?
Many wallets support several blockchains and all tokens on them. Each blockchain uses its own address format, but one seed phrase can manage them all.