A wallet stores private keys and lets you send and receive crypto. It does not store coins. The coins live on the blockchain. The wallet holds the keys that control them. That distinction matters. Losing your wallet does not lose your coins if you have the seed phrase. Losing your seed phrase loses your coins even if you still have the wallet. The seed phrase is the real wallet. The app or device is just a tool for using it.

Wallets come in two main types. Hot wallets are connected to the internet. MetaMask, Phantom, and exchange wallets are hot. They are convenient for trading and using dapps. Cold wallets keep keys offline. Hardware wallets like Ledger and Trezor are cold. They are safer but less convenient. Most people use both. A hot wallet for daily use with a small balance. A cold wallet for savings. The setup takes an hour and costs $50 to $200. If you hold more than you can afford to lose, it is worth it. Custodial wallets on exchanges are a third option. The exchange holds your keys. You trust them. That works until it does not. FTX customers learned that lesson in 2022.

Wallet types

• Hot wallet — connected to the internet, convenient
• Cold wallet — offline, secure
• Custodial — exchange holds keys, you trust them
• Non-custodial — you hold keys, you control funds

Not your keys, not your coins. The phrase is overused. It is also true.