A Simple Introduction to Crypto Wallets

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What is a Crypto Wallet?

  • Cryptocurrency wallet stores the public and private keys required to buy Bitcoin or other cryptocurrencies
  • Also provides digital signatures authorizing each transaction
  • There are various crypto wallet types which can be divided into three groups: software, hardware, and paper wallets

How Does it Work?

  • Crypto wallets don’t store cryptocurrencies. Instead, they provide the tools required to interact with a blockchain
  • Crypto wallets store a pair of public and private keys
  • Wallet also includes an address, which is an alphanumeric identifier that is generated based on the public and private keys
  • When you create a crypto wallet, a seed phrase is automatically generated. The seed phrase is a representation of a long string of random numbers — and your wallet uses it to generate the private keys that let you send and spend your crypto
  • The reason the seed phrase is given to you in word form (rather than a long string of random numbers) is because humans are better at remembering and interacting with a series of words
  • If you lose or delete a wallet, you can even recreate it using your seed phrase alone
  • But if you lose your seed phrase you lose access to your crypto


  • Crypto address: A crypto address is a string of characters that represents a wallet that can send and receive cryptocurrency. It is akin to a real-life address, email or website. Every address is unique and denotes the location of a wallet on the blockchain.
  • Public key cryptography: is an encryption framework that uses two mathematically related, but not identical, keys – a public key and a private key. It is computationally infeasible to compute the private key based on the public key.
  • Public Key: Public key is used by a sender to encrypt information
  • Private Key: Private key is used by a recipient to decrypt it
  • Seed Phrase: Seed phrase is a series of words generated by your cryptocurrency wallet that give you access to the crypto associated with that wallet

Private Key vs. Seed Phrase

  • Private keys allow you to send or spend some of your Bitcoin, Ethereum, or other crypto — they’re algorithmically derived from the long string of numbers represented by your seed phrase
  • Your seed phrase gives you access to your wallet and all the private keys in the wallet
  • Seed phase is basically the master key to your password manager for your crypto. As long as you have your master password (the seed phrase) you have access to all the associated crypto.

Types of Crypto Wallets

Software Wallets

  • Web Wallets: access blockchains through a browser interface (e.g. Metamask)
  • Desktop Wallet: software you download and execute locally on your computer (e.g. Electrum)
  • Mobile Wallets: Mobile wallets function much like their desktop counterparts but designed specifically as smartphone applications (e.g. Exodus)

Hardware Wallets

  • Hardware wallets are physical, electronic devices that use a random number generator (RNG) to generate public and private keys
  • The keys are then stored in the device itself, which isn’t connected to the Internet
  • Most notable hardware wallets: Ledger, Trezor


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