Wallet types

Overview

A crypto wallet holds your private keys, which authorize spending from your addresses. The wallet doesn’t “hold coins” so much as it holds the keys that unlock coins recorded on the blockchain. Choosing a wallet balances convenience, security, and recovery options.

Custody models

• Custodial: A service (exchange/app) holds keys for you. Pros: convenience, password reset, integrated trading. Cons: counterparty risk; you must trust their security and solvency.
• Self-custody (non-custodial): You control the keys (seed phrase). Pros: sovereignty and censorship resistance. Cons: you’re responsible for backups and security.

Hot vs. cold

• Hot wallets: Connected to the internet (mobile/desktop/web). Great for small, frequent spends; higher attack surface.
• Cold storage: Keys are generated and kept offline (hardware wallet, paper, air-gapped). Best for long-term savings; less convenient.

Common wallet types

• Mobile/desktop wallets: Easy daily use; support for QR scanning and address books.
• Hardware wallets: Dedicated device that signs transactions offline. Protects keys from malware on your computer/phone.
• Web wallets/browsers: Fast onboarding, but ensure you understand custody (some are custodial) and phishing risks.
• Paper wallets (legacy): A printed seed or private key. Not recommended for beginners due to setup pitfalls and physical risks.
• Multisig: Requires M-of-N keys to spend (e.g., 2-of-3). Reduces single-point-of-failure; good for team treasuries and advanced personal security.
• Smart-contract wallets (where supported): Add features like spending limits and social recovery. Implementation varies by chain.

How to choose

• Small daily spending: Hot mobile wallet + strong phone security.
• Medium savings: Hardware wallet; consider passphrase; keep backups.
• Long-term/sizeable holdings: Hardware wallet or multisig; store backups in separate, secure locations.
• Team funds: Multisig with clear key-holder roles and recovery playbook.

Setup & recovery basics

• Generate a new wallet offline when possible; write down the seed phrase legibly.
• Store backups in at least two physically separate places; consider fire/water-resistant storage.
• Use an optional passphrase (BIP39) for additional security if you can manage it safely.
• Test a small receive → send cycle before depositing larger amounts.

Educational content only; not investment advice.

See also: Fees & mempool · Security hygiene · Back to “What is Bitcoin?”