A crypto wallet is a software, hardware, or other tool that allows a user to manage crypto assets through the corresponding private keys and create operations on a blockchain. Unlike a traditional bank account, a wallet does not literally store coins or tokens inside the device. The assets remain recorded on the relevant blockchain, while the wallet provides the means to control them.

Key wallet components include key material, addresses, and software or hardware used to create and sign transactions. To send funds, the wallet constructs a transaction and uses transaction signing to prove control of the relevant key.

Main types of crypto wallets

  • hot wallets — connected to the network continuously or regularly;
  • cold wallets — designed to keep key material away from continuously connected environments;
  • hardware wallets — use a dedicated physical device;
  • software wallets — operate through applications, browsers, or operating systems;
  • custodial wallets — keys are controlled by a third party;
  • non-custodial wallets — the user controls the keys.

A wallet may support one or multiple blockchains and different types of assets, including coins and tokens. Depending on its architecture, it may also interact with dApps, smart contracts, DeFi protocols, and staking systems.

What a wallet actually stores

Crypto assets are not physically stored in a wallet file or device. The blockchain contains the relevant state, while the wallet stores or accesses the secret information required to control those assets. Losing the key material can therefore result in loss of access even though the assets themselves remain recorded on the blockchain.

Wallet security depends heavily on protecting the private key or seed phrase. If the key material is compromised, an attacker may be able to authorize transactions. Wallet security is therefore closely connected with private-key security, backup, and recovery procedures.