The most common misunderstanding about wallets is that coins live inside them. They do not. The coins live on the network. The wallet holds the key.
What a key is
Every holding is one or more public addresses and the private key that matches them. The public address is what others see and what you give them. The private key is what proves ownership, and anyone who has it can move the funds. It is a long string of characters, and it is the only thing standing between a balance and a stranger.
Two kinds of wallet
| Custodial | Self-custodial | |
|---|---|---|
| Who holds the key | The exchange or provider | You |
| What you need to remember | A password | A recovery phrase |
| If they fail | You ask them | Nobody can help you |
| Best for | Money you are actively trading | Money you intend to keep |
Neither is safer in the abstract. A custodial wallet is safer from a lost password and more dangerous from an operator problem. A self-custodial wallet is the opposite on both counts. Choosing where you trade goes into which risk you are taking.
The recovery phrase is the wallet
A twelve- or twenty-four-word phrase, written down by you, that restores every key. Whoever reads it owns the money. That has been the cause of more losses than any market crash: it gets photographed, sent to support, typed into a fake site.
Three rules, no exceptions: never type it into a website; never send it to anyone, including someone claiming to be support; never store it where a synced folder or a phone backup copies it. Our full safety guide walks through storage that has actually worked for people.
A note on balances held by a plan
When a programme holds funds for you, it holds them on the member's behalf through a custodial arrangement. That is what the withdrawal process is for, and it is worth reading before you deposit rather than after.