Types of Crypto Wallets, Sorted by Who Holds the Keys

What a wallet actually holds

Coins are not inside your wallet. Who owns how much is written on a shared ledger, the blockchain, and what a wallet holds is the key (private key) that can sign transactions moving coins from a particular address on that ledger. Only whoever holds the key can move the coins at that address, so choosing a wallet means choosing who keeps that key, where and how. Many wallets derive their keys from a recovery phrase of 12 to 24 words, so with the phrase alone you can restore the same wallet on another device.

Who holds the keys: custodial and non-custodial

With a custodial wallet, a provider such as an exchange keeps the keys, and you log in with a username and password to see your balance. If you forget the password you can recover access through identity checks, and trading is fast, but if the provider cannot pay out, the balance on screen may be unrecoverable. With a non-custodial wallet you hold the keys yourself: you can move coins without anyone's permission, but if the recovery phrase is lost or stolen, nobody can get it back for you. It is less that one is safer than that you are trusting different things: the provider, or your own safekeeping.

• Custodial: provider holds keys; account recovery possible; provider risk
• Non-custodial: you hold keys; full control; no recovery if lost
• A custodial balance is a number in the provider's books
• The heart of non-custodial is keeping the recovery phrase safe

Connected or not: hot and cold wallets

A hot wallet keeps its keys on an internet-connected device; phone apps and browser extension wallets are typical. They are convenient for sending and receiving instantly, but if the device catches malware or you sign on a fake site, they can be drained remotely. A cold wallet keeps keys somewhere cut off from the internet, typically a hardware wallet. It connects only briefly to sign, so it resists remote attacks, but it is less convenient to use, and losing the device or the recovery phrase is just as dangerous. Korean won exchanges are also required by law to keep at least 80% of the economic value of users' coins in cold wallets.

The main types at a glance

Combining the two axes sorts the common wallets as follows. Products with the same label differ in supported coins, features and security design, so check the official documentation.

• Exchange account: custodial; convenient but you must trust the exchange
• Phone or desktop app wallet: non-custodial hot wallet; device security is wallet security
• Browser extension wallet: non-custodial hot wallet; easy to connect to web services, so beware of signing accidents
• Hardware wallet: non-custodial cold wallet; connects only to sign
• Multisig or MPC wallet: needs several keys or key shares to sign; complex to set up

Networks and address formats

One wallet app often supports several blockchains, and different networks, such as those in the Ethereum family, can use addresses that look the same. So even with the right address, choosing the wrong network sends coins to the wrong chain, and if the wallet doesn't support that chain the balance won't show. When choosing a wallet, first check that it supports the coins and networks you plan to hold, and the first time you send from an exchange to the wallet, check you picked the same network and confirm arrival with a small test transfer. Korean exchanges often require you to register a personal wallet address in advance.

An order for choosing

Splitting wallets by purpose reduces risk more than choosing just one. Separate the small amount you use often from money you will hold for a long time, and the longer you hold, the further the keys should be from the internet. Install apps only from links on the official site or by the exact name in official app stores, and buy hardware wallets through the maker's official channels. Write the recovery phrase on paper or metal and keep it offline; never store it in photos, messengers or cloud notes. Detailed ways to protect a recovery phrase and respond to incidents are covered in the wallet security guide.

• 1. Separate small everyday amounts from long-term holdings
• 2. The longer the hold, the colder the wallet
• 3. Install and buy only through official channels
• 4. Write the recovery phrase on offline media and store it apart
• 5. Practise deposits, withdrawals and recovery with small amounts first

Using an exchange account like a wallet

Keeping coins in an exchange account is a form of storage too, so account security is wallet security. Use a long password not shared with any other site, use an authenticator app or physical security key rather than text messages for two-factor authentication, and turn on withdrawal address allowlisting if it is available. This site's Password Generator creates random passwords of a chosen length and character set entirely inside your browser, and the Password Strength Meter estimates how long a brute-force attack would take from length and character types. Never enter a recovery phrase into any tool.

Summary and caution

Sorting crypto wallets by who holds the keys and whether they are online makes their trade-offs clear. Custodial means trusting the provider and non-custodial means trusting your own safekeeping; hot wallets gain convenience and cold wallets gain resistance to remote attacks, each giving up something else. In any wallet, remember that the recovery phrase is the wallet itself. This guide explains structure; it does not recommend any product or exchange and is not investment advice.