Crypto and derivatives · updated October 21, 2026
What is a crypto wallet and what types are there
A crypto wallet does not actually hold your coins. It holds the keys that prove they are yours. The coins always stay on the blockchain. Whoever has the keys controls the coins. That is where the crypto saying comes from: "not your keys, not your coins".
How it works
There are two big kinds. Custodial wallets are your accounts on platforms (Binance, Coinbase, Kraken): the platform keeps the keys for you, like a bank. Self-custody wallets (MetaMask, Trust Wallet, or devices like Ledger and Trezor) give the keys to you. The ones connected to the internet are called "hot", and devices that stay offline are called "cold" and are much harder to hack.
Worth knowing
For small amounts you use often, a phone wallet is convenient. For long-term savings, an offline device (hardware wallet) is the safer choice.
When crypto wallet can fool you
Lost recovery phrase: if you lose your phone and do not have the 12 or 24 words, the coins are gone for good. Phrase photographed or saved in the cloud: it can be stolen. Fake wallets: download only from the official app store or the maker's website.
Related terms
Learn it in the Academy
Questions about crypto wallet
Is it safe to keep crypto on a platform?
It is convenient, but you depend on the platform. If it is hacked or goes bust, as FTX did in November 2022, you can lose access to your money. Platforms licensed in the EU under MiCA must keep client assets separate.
What is a hardware wallet?
A small device, like a USB stick, that keeps your keys offline and signs transactions without sending the keys over the internet. They usually cost between $60 and $250.
These explanations are for information only. They are not a recommendation to buy or sell.
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