Wallet
A wallet is software or a device that stores your private keys and signs transactions with them. The coins stay on the blockchain; the wallet holds the right to move them, which is why losing a wallet with no backup means losing the money.
How it works
A wallet creates a key pair: a public one, from which a receiving address is derived, and a private one used to sign transfers. The signature proves to the network that the instruction came from the owner, while the key itself never leaves the device.
Every key derives from a seed phrase, a set of 12 or 24 words. That is why a wallet can be restored on another device in another app: the phrase matters, the software does not.
The dividing line is who holds the keys. In a non-custodial wallet only you do. In a custodial one an exchange or service does, and what you own is not coins but the company's promise to hand them over.
The main kinds
- HardwareA separate device that keeps the key offline and signs inside itself. The key never reaches the computer, not even while signing. For meaningful amounts this is the sensible minimum.
- SoftwareAn app on a phone or an extension in a browser. Convenient for everyday amounts, but the key lives on a device that is online.
- Exchange-heldYou hold no keys at all. Fine for trading, pointless for storage: a bankruptcy or a frozen account is not yours to resolve.
- MultisigA transfer needs several keys out of a set, two of three for instance. It removes the single point of failure at the cost of everyday convenience.
Rules that save money
- Check the network firstThe same USDT exists on several networks. Sending to the wrong one is the most common unrecoverable loss beginners make.
- Send a test amount firstSend a small amount to a new address and wait for it to arrive. That fee is cheaper than any mistake.
- Separate your walletsOne for long-term holding, one for trading and connecting to sites. A compromise of the second must not cost you the first.
- Revoke approvalsConnecting to a DeFi service grants a contract the right to spend your tokens. That approval stays live until you revoke it.