Wallets and keys
How crypto wallets work
Short answer
A crypto wallet is an application that gives you control over your account and lets you manage your digital assets. It shows your balance, transaction history and lets you send and receive funds. Wallets don't hold your funds – they're a window to view and interact with your assets on the blockchain.
What wallets do
A crypto wallet is a tool for interacting with your account. It shows your balances, transaction history and gives you a way to send and receive funds. Your wallet lets you sign in to applications, read your balance, send transactions and verify your identity.
Sources: ethereum.org
Wallet providers don't have custody of your funds. They just provide you a window to see your assets and tools to manage them. You can swap wallet providers at any time, and many wallets let you manage several accounts from one application.
Sources: ethereum.org
How wallets work with your keys
An account is made up of a pair of cryptographic keys: public and private. Your private key is what you use to sign transactions, so it grants you custody over the funds associated with your account. You never really hold cryptocurrency – you hold private keys and the funds are always on the blockchain's ledger.
Sources: ethereum.org
A private key is made up of 64 hex characters and can be encrypted with a password. The public key is generated from the private key using the Elliptic Curve Digital Signature Algorithm. Your public address is derived from your public key and is a 42-character address.
Sources: ethereum.org
Types of wallets
There are several ways to interface with your account. Physical hardware wallets are devices that let you keep your crypto offline for security. Mobile applications make your funds accessible from anywhere. Browser wallets are web applications you use directly in your browser.
Sources: ethereum.org
Browser extension wallets are extensions you download that let you interact with your account through the browser. Desktop applications let you manage your funds via macOS, Windows or Linux. Most wallet products will let you generate an account, so you don't need one before downloading a wallet.
Sources: ethereum.org
Recovery and security
Wallets often give you a seed phrase that you must write down and keep safe. This is the only way you'll be able to recover your wallet. Don't store it on a computer. Write it down and keep it in a secure location.
Sources: ethereum.org
Financial freedom comes with responsibility. There is no customer support in crypto and you are responsible for keeping your keys safe and secure. Transactions can't be reversed and wallets can't be easily recovered, so take precautions and always be careful.
Sources: ethereum.org
Wallets vs exchanges
Centralized exchanges will link your wallet to a username and password that you can recover in a traditional way. However, you're trusting that exchange with custody over your funds. If the exchange has financial trouble, your funds would be at risk.
Sources: ethereum.org
Official sources used on this page
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Questions
Is a wallet the same as an account?
No. An account is an entity with a balance that can send messages on the blockchain. A wallet is an interface or application that lets you interact with your account. You can use different wallet providers to access the same account.
Sources: ethereum.org ethereum.org
Do wallets hold my crypto?
No. Wallets are tools for interacting with your account. You don't hold cryptocurrency – you hold private keys. The funds are always on the blockchain's ledger. Wallet providers don't have custody of your funds.
Sources: ethereum.org ethereum.org
What should I do with my seed phrase?
Write down your seed phrase and keep it somewhere safe. This is the only way you'll be able to recover your wallet. Don't store it on a computer. If you use a web wallet, bookmark the site to protect yourself against phishing scams.
Sources: ethereum.org
Can I recover a lost transaction?
No. Transactions can't be reversed. This is why it's important to take precautions and always be careful when sending funds. There is no customer support in crypto to help undo mistakes.
Sources: ethereum.org