Definition
A crypto wallet is software or a device that helps users interact with blockchain accounts. The assets remain recorded on the network; they are not physically stored inside the wallet. In a conventional self-custody wallet, private keys provide the ability to sign transactions, while addresses identify destinations for receiving assets.
How It Works
To send an asset, the wallet prepares a transaction and asks for authorization. A signature allows the network to verify that the required key approved the transaction without revealing that key. The transaction is then submitted for network validation. Some wallets instead use smart-contract rules or distributed key shares. A wallet may support several networks, but support must be checked for each asset and network combination.
Key Considerations
Custodial wallets rely on a provider to manage signing credentials; self-custody wallets make the user responsible for their control and recovery. Hot and cold describe how signing keys are exposed to online environments, a separate distinction from custody. Back up the required recovery information, verify destination addresses and networks, and inspect signing requests. A legitimate wallet interface does not make every connected application trustworthy.