# What is a crypto wallet?

<mark style="color:$info;">A</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**crypto wallet**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">is like your</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**bank account**</mark><mark style="color:$info;">, but</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**without the bank**</mark><mark style="color:$info;">.</mark>\ <mark style="color:$info;">You</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**are the bank**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">— you control everything in your account.</mark>

<figure><img src="https://2773531205-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FwPYQpCxrPJoaRvqUIVza%2Fuploads%2FyQWN0zhCACVNpTEpNUD5%2FWhat%20is%20Crypto%20Wallet.png?alt=media&#x26;token=d2a890f5-7093-44a9-beac-86b594418526" alt=""><figcaption></figcaption></figure>

<mark style="color:$info;">A wallet is simply a</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**piece of software**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">that allows you to:</mark>

* <mark style="color:$info;">Store cryptocurrency</mark>
* <mark style="color:$info;">Send and receive crypto</mark>
* <mark style="color:$info;">View transaction history</mark>
* <mark style="color:$info;">See account balances</mark>
* <mark style="color:$info;">Interact with</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**dApps**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">(decentralized applications)</mark>

{% hint style="info" %} <mark style="color:$info;">Some wallets are better than others — and there are many different options available.</mark>
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## 🧠 Common Misconceptions

<mark style="color:$info;">There are many misconceptions and lack of understanding in how crypto wallets work. Technically, wallets don’t ‘hold’ cryptocurrencies.</mark>

{% tabs %}
{% tab title="In a nutshell" %} <mark style="color:$info;">Let’s clarify:</mark>

* <mark style="color:$info;">**Wallets don’t technically “hold” your cryptocurrency**</mark>
* <mark style="color:$info;">Your</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**coins do not exist physically**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">and are</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**not stored on your device**</mark>
* <mark style="color:$info;">They only ever exist</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**on their respective blockchain**</mark>

<mark style="color:$info;">When you “send” crypto, it doesn't physically move —</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**balances on the blockchain**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">are updated instead.</mark>

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Think of a **blockchain** as an **accounting system**, where only **balance changes** are recorded.
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{% tab title="Extensive" %} <mark style="color:$info;">Your coins do not physically exist and are not stored on any device, they only ever exist on their blockchain. The assets can move from one address to another or, more properly, the balance of the addresses can change, but it doesn’t actually go anywhere. Don’t forget that a blockchain, in simple terms, is an accounting system where balances are updated.</mark>
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## 🔐 What Do You Actually Own?

{% tabs %}
{% tab title="In a nutshell" %} <mark style="color:$info;">When you “own” cryptocurrency, what you</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**actually own**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">is:</mark>

<mark style="color:$info;">✅</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**A private key**</mark>

<mark style="color:$info;">A wallet safeguards this</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**private key**</mark><mark style="color:$info;">, which represents:</mark>

* <mark style="color:$info;">Your</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**account credentials**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">(also called</mark> <mark style="color:$info;"></mark>*<mark style="color:$info;">seed</mark>*<mark style="color:$info;">,</mark> <mark style="color:$info;"></mark>*<mark style="color:$info;">secret</mark>*<mark style="color:$info;">,</mark> <mark style="color:$info;"></mark>*<mark style="color:$info;">passphrase</mark>*<mark style="color:$info;">)</mark>
* <mark style="color:$info;">The ability to</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**sign transactions**</mark>
* <mark style="color:$info;">The power to</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**control your assets**</mark>

<mark style="color:$info;">When you create a new wallet, it generates:</mark>

* <mark style="color:$info;">A</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**private key**</mark>
* <mark style="color:$info;">A</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**public key**</mark>
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{% tab title="Extensive" %} <mark style="color:$info;">Your coins do not physically exist and are not stored on any device, they only ever exist on their blockchain. The assets can move from one address to another or, more properly, the balance of the addresses can change, but it doesn’t actually go anywhere. Don’t forget that a blockchain, in simple terms, is an accounting system where balances are updated.</mark>&#x20;

<mark style="color:$info;">When you own cryptocurrencies, what you actually own is a private key. Wallets safeguard this private key, which are your account credentials (seed, secret, passphrase) and use those credentials to sign/do transactions. When you create a new account on a crypto wallet, you get a private key and a public key.</mark>
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## 🗝️ Public vs Private Keys

<mark style="color:$info;">The “private key” is usually random words or numbers that you must protect by all costs and not reveal to anyone.</mark>

<figure><img src="https://2773531205-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FwPYQpCxrPJoaRvqUIVza%2Fuploads%2Fg6xMjGy9kSIwFSv8xU0g%2FPublic%20vs%20Private%20Keys.png?alt=media&#x26;token=71945ffe-5843-4b23-99b9-8fb0fb23430c" alt=""><figcaption></figcaption></figure>

<table><thead><tr><th>Key Type	</th><th width="350.5999755859375">What It Does	</th><th>Shareable?</th></tr></thead><tbody><tr><td>Public Key</td><td>Your receiving address</td><td>✅ Yes</td></tr><tr><td>Private Key</td><td>Your access password to the wallet</td><td>❌ No</td></tr></tbody></table>

{% tabs %}
{% tab title="In a nutshell" %} <mark style="color:$info;">Public and private keys are a</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**fundamental part**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">of blockchain tech.</mark>

<mark style="color:$info;">📨 Your public key is like your email address — you can safely share it.</mark>\ <mark style="color:$info;">🔐 Your private key is like your password — never share it with anyone.</mark>

### <mark style="color:$info;">📌 Private Key = Seed Phrase = Recovery Phrase</mark>

* <mark style="color:$info;">Usually</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**12 or 24 random words**</mark>
* <mark style="color:$info;">Sometimes called</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**mnemonic phrase**</mark>
* <mark style="color:$info;">Grants full access to your account and funds</mark>

{% hint style="warning" %} <mark style="color:$warning;">If someone gains access to your private key, they can steal your assets.</mark>\ <mark style="color:$warning;">If you</mark> <mark style="color:$warning;"></mark><mark style="color:$warning;">**lose**</mark> <mark style="color:$warning;"></mark><mark style="color:$warning;">your private key, you</mark> <mark style="color:$warning;"></mark><mark style="color:$warning;">**cannot recover**</mark> <mark style="color:$warning;"></mark><mark style="color:$warning;">your funds.</mark>
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### <mark style="color:$info;">🧬 Cryptographic Link</mark>

<mark style="color:$info;">There is a</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**mathematical relationship**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">between your private key and public key:</mark>

* <mark style="color:$info;">If you</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**have the private key**</mark><mark style="color:$info;">, you can recover the public key and wallet</mark>
* <mark style="color:$info;">If you</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**only have the public key**</mark><mark style="color:$info;">, you</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**cannot**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">derive or recover the private ke</mark>y
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{% tab title="Extensive" %} <mark style="color:$info;">Public and private keys are an integral component of cryptocurrencies and blockchain technology. Public and private keys are subsequently analogous to an email address and password, respectively. Your public key is your receiving address, which you can share with anyone to send you cryptocurrencies. Your private key (also called seed phrase, passphrase, recovery phrase or mnemonic) is your password, usually 12 or 24 random words, which unlocks the right to access your account and spend the associated cryptocurrencies. As it provides access to your cryptocurrencies, it should – as the name suggests – remain private and never shared with anyone. There is a cryptographic link between the public key and the private key and you can recover the public key and your account if you own the private key. However, it’s impossible to find or recover the private key using only the public key.</mark>
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## 🤝 Self-Custody: You Are the Bank

<mark style="color:$info;">**Owning and controlling your private keys**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">means you have</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**full control**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">over your crypto.</mark>

<mark style="color:$info;">This is called</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**self-custody**</mark><mark style="color:$info;">, and it’s a</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**core benefit**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">of blockchain technology.</mark>

<mark style="color:$info;">💡 Why Self-Custody Matters</mark>

* <mark style="color:$info;">No third party needed to approve transactions</mark>
* <mark style="color:$info;">You hold your funds even if exchanges or apps shut down</mark>
* <mark style="color:$info;">You can access your wallet anywhere with your private key</mark>
* <mark style="color:$info;">You are responsible for your own security</mark>

{% hint style="info" %}
**Self-custody** is one of the defining features of decentralized finance and crypto. You are in charge - and responsible - for your own digital wealth.
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