You probably own a wallet or purse to keep your cash, cards, or other personal items safe. A crypto wallet works similarly, but instead of holding physical money or items, it stores the passkeys you need to sign for your cryptocurrency transactions, providing an easy way to access your crypto.
Understanding crypto wallets and how to use them safely is very important. If you make one wrong move, your coins might vanish. That’s why we created this guide to break down what a crypto wallet is, how it works, the types, and how to keep it secure..
Key Takeaways
- A crypto wallet lets you store, send, and receive cryptocurrencies. It’s just like a bank account for your coins.
- Wallets can be hot (connected to the internet) or cold (offline).
- Wallets may also be custodial (managed by a third party) and non-custodial (you hold the keys).
- Vent is non-custodial, which means you control your crypto at all times.
- To avoid losing your funds, always back up your private keys or seed phrases and keep your keys safe.
- You can use different types of wallets and should find the combination that works for you.
What Is a Crypto Wallet?
A crypto wallet is a digital tool that securely stores the passkeys required to access funds on the blockchain or sign for cryptocurrency transactions. It is like your personal safe for holding digital assets. But the twist is, it doesn’t actually “hold” your crypto like a bank holds cash. What it really holds are the keys (a.k.a. your private keys) that let you access and control your money on the blockchain.
In the real sense, cryptocurrencies are not "stored" in wallets. Cryptocurrencies are bits of data stored and scattered across the blockchain. What a wallet does is find all the bits of data associated with your public address and provide an interface that lets you access your crypto. Using a wallet, you can view your assets and carry out transactions.
Here’s what you can do with a crypto wallet:
- Receive crypto from anyone, anywhere
- Store your coins securely
- Send crypto to someone else
- Check your balance anytime
How Does a Crypto Wallet Work?
Crypto doesn’t “sit” anywhere. It lives on the blockchain. What your crypto wallet does is give you the power to access and control the coins that belong to you on that blockchain.
Crypto wallets come with two keys.
- 🔓Public Key: This is your wallet address. It’s like your account number. It’s safe to share, and it’s what people use to send you crypto.
- 🔒Private Key: This one is for you and you alone. It unlocks everything in your wallet. If someone else gets it, they can take your money. Please don’t share it. Ever.
When you send cryptocurrency, your wallet uses your private key to sign the transaction. Thus, if you lose your private key, you can no longer access your crypto. Unlike a password, there is no way to reset or retrieve them. You should protect your private keys better than your ATM PIN.
Types of Crypto Wallets
Now that you know what crypto wallets are and how they work, let’s walk through the different types of wallets. In this article, we'll be discussing the types of crypto wallets under two headings:
- Hot vs. Cold Wallets.
- Custodial vs. Non-custodial Wallets.
🔥Hot Wallets vs. ❄️ Cold Wallets
Internet connectivity is what determines whether a wallet is hot or cold. Hot wallets are crypto wallets that are connected to the internet. In contrast, cold wallets are offline (i.e., not connected to the internet).
🔥Hot Wallets (Always Online)
Hot wallets are connected to the internet and are perfect for everyday use. Think of apps like Trust Wallet, MetaMask, or Tokenpocket.
Using a hot wallet is like carrying cash in your pocket. It’s on you, ready to spend, super easy to access, but if you’re not careful, someone could snatch it.
Pros: Fast access, suitable for frequent trading.
Cons: More vulnerable to hacks if your phone or device is compromised.
❄️Cold Wallets (Fully Offline)
A cold wallet is a crypto wallet that stays completely offline, meaning it’s not connected to the internet. This makes it much harder for hackers to access, and it’s often used for long-term crypto storage. Cold wallets include hardware wallets (like Ledger or Trezor) or even paper wallets (yes, actual paper with your keys written on it).
Using a cold wallet is like locking your cash in a safe at home. It’s protected from thieves, but you can’t exactly reach into your safe whenever you want to buy suya.
Pros: Super secure.
Cons: Less convenient. It’s like throwing your money into the ocean if you lose your keys or seed phrase.
🔐Custodial vs. Non-Custodial Wallets
Whether a wallet is custodial or non-custodial depends on who secures the private keys.
Custodial Wallets (A third-party holds your keys)
A custodial wallet is a type of crypto wallet where a third party, usually an exchange or platform, holds your private keys for you. Think of this like saving your money in a bank. This third party, such as an exchange, holds your private keys and signs the transactions on your behalf. Exchanges like Binance, Crypto.com, or KuCoin offer custodial wallets.
Pros: Easy to use. You don’t need to stress over technical stuff.
Cons: You don’t have complete control. If the platform shuts down, gets hacked, or bans your account… it’s out of your hands.
Non-Custodial Wallets (You Hold the Keys)
A non-custodial wallet is a crypto wallet where you hold the private keys and, by extension, complete control of your funds. You’re the boss. No third party can move, freeze, or touch your funds. Platforms like Vent offer non-custodial wallets. 😉
Pros: You have full control. No one can lock you out.
Cons: You’re in charge of your security. No backup if you lose access.
What Type of Wallet Does Vent Use?
You might be wondering how Vent helps Nigerians convert crypto to cash. When using Vent, your Bitcoin (BTC), Solana (SOL), Binance Coin (BNB), USD Coin (USDC) or USDT never sits in our custody. Instead, all you have to do is generate a unique, safe, and reusable wallet for each crypto network through which you want to send crypto. Once your crypto hits your unique wallet address, we credit your bank account with naira. Non-custodial and safe! That’s why Vent is the best app for converting crypto to cash.
Ready to move your crypto and get cash in seconds?
👉Download Vent now and start cashing out like a boss.
Wallet Security Tips (Read This Twice 😤)
Here are some must-dos:
- Backup your wallet: Write down your recovery phrase and store it offline. No screenshots abeg.
- Use strong passwords and 2FA (Two-Factor Authentication)
- Don’t share your private key or recovery phrase. Not even with your best friend or the love of your life.
- Watch out for fake apps and phishing websites. Always double-check.
- Don’t leave large amounts in hot wallets. Store long-term crypto in cold wallets instead.
Final Verdict
You know how shady things can get sometimes. One wrong click and your funds vanish into thin air. But do not worry; once you understand what a wallet is, how it works, and how to protect it, you’re already a big step ahead.
You can use the different wallet types for various purposes. Self-custody and cold wallets are great for storing large amounts of crypto. Just make sure you keep your private keys safe. On the other hand, you can keep short-term holdings needed for day-to-day use or trading in hot or custodial wallets (e.g Centralised Exchanges). Ensure you have strong security settings and 2FA enabled. It’s also advisable to only trade on reputable Exchanges, preferably those with proof of reserve in case of hacks.