Crypto wallet.

What is a crypto wallet?

A crypto wallet is a secure, digital wallet for your cryptocurrency. Learn how to choose and set up your first crypto wallet with this beginner’s guide.

10 min read

The following statements do not constitute investment advice or any other advice on financial services, financial instruments, financial products, or digital assets. They are intended to provide general information. The following statements do not constitute an offer to conclude a contract for the purchase or sale of financial instruments and financial products or an invitation to submit such an offer and to buy or sell any particular digital asset. Cryptocurrencies are subject to high fluctuations in value. A decline in value or a complete loss are possible at any time. The loss of access to data and passwords can also lead to a complete loss.


  • A crypto wallet is a digital tool for securely managing cryptocurrencies. You need a private key to access it. It’s essential to have a wallet before investing in digital currencies.
  • Crypto wallets are classified into two main types: software (like mobile, desktop, or web) and hardware wallets. They offer different security levels and features for managing digital assets.
  • The type of crypto wallet you choose depends on your personal needs when it comes to security, fees, supported cryptocurrencies, and customer support.

If you’re planning on getting into crypto, before you decide which currencies to invest in, you’ll need to set up your crypto wallet. This is where you’ll organize your crypto portfolio. Each wallet comes with a private key that allows you—and only you—to access the wallet’s contents. But setting up your wallet isn’t just about socking away any Bitcoin or Ethereum you may buy on an exchange. It also allows you to securely send and receive these and other types of cryptocurrencies.

There are different types of crypto wallets available, including mobile apps and wallets that look like USB sticks. Although there is some variation, most function in a similar way by storing private key pairings that allow you to sync your wallet across multiple devices to send and receive cryptocurrency. 

Crypto Wallets Explained in 26 Seconds

You should definitely know how to use and set up a crypto wallet before you make your first cryptocurrency purchase. With that in mind, let’s take a closer look at how cryptocurrency wallets work and how to choose the best one for you.

How do crypto wallets work?

Broadly speaking, crypto wallets come in either software or hardware forms. Though each kind functions a bit differently, they are all designed to allow you to securely access any cryptocurrency you own. 

It’s important to note that a crypto wallet does not hold any actual cryptocurrency. Instead, it holds the public and private key information needed to carry out crypto transactions. The cryptocurrency itself is stored on a blockchain—a type of digital ledger that serves as the basis for how many decentralized cryptocurrencies work.

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Public vs. private keys—what’s the difference?

Crypto wallets generally use two types of keys: public keys and private keys.

Public keys operate in a similar way to your bank account number. A public key is a long string of random nu

mbers that can be shared with a third party, such as a cryptocurrency exchange, without compromising the security of your wallet. This key allows you to receive cryptocurrency in transactions—oftentimes by using a wallet address, which is essentially a compressed version of the wallet’s public key.

Private keys, on the other hand, should always be kept private. A private key allows you to access the actual cryptocurrency on the blockchain. So if someone has access to your private keys, it’s as good as having access to the crypto in your wallet. 

How do I send crypto from my crypto wallet?

To send cryptocurrency to another wallet is relatively simple. Once you know the recipient’s wallet address, you can open your crypto wallet, select how much crypto you want to send, and send it to that address. 

Types of crypto wallets

As noted above, crypto wallets can generally be divided into two categories: software and hardware. But there are actually a number of different wallet types that fall into those general categories. 

Let’s take a look at the three most popular types of crypto wallet.

Hosted wallets

Hosted wallets are simple and easy to set up, which explains their popularity. These wallets are “hosted” directly on the exchange where you buy your crypto, so you may sometimes hear them referred to as “exchange wallets.” If you’ve ever bought cryptocurrency on an exchange like Coinbase or Kraken and kept that crypto on the exchange, you’ve already used a hosted wallet. 

With a hosted wallet, the crypto exchange typically holds on to your private key for you. This private information is kept and accessed online, which makes it potentially vulnerable to hackers. Hosted wallets may also be limited in their uses, and you may not be able to execute certain crypto transactions—such as buying an NFT —with crypto that’s in a hosted wallet. On the plus side, forgetting your password is usually not a problem, because the exchange has ways to help you retrieve that data. 

Non-custodial wallets

A non-custodial wallet allows you to have complete control over your crypto, with no third-party involvement. These software wallets generally offer more freedom and features than hosted wallets. For example, if you’re interested in buying NFTs or staking cryptos—a process in which your crypto supports a blockchain network and earns rewards for doing so—you may want to consider a non-custodial wallet. 

With a non-custodial wallet, your cryptocurrencies can be accessed using a private key that’s in your control. Since you’re the only one managing the private key, it’s important to keep safe. If you forget or lose your key, you won’t be able to access your cryptos. And if your key becomes known to someone else, the contents of your wallets may be in danger.

Hardware wallets

Hardware wallets, also known as “cold wallets” or “cold storage wallets,” are physical devices. They tend to look similar to a USB stick. Your private key for accessing your cryptocurrency on a blockchain is stored on this device. 

Since a hardware wallet isn’t connected to the internet and exists in physical form, it’s considered by many to be the safest way to store cryptocurrency. A hacker halfway around the world has no way of accessing your crypto without this device in hand.

There are a couple downsides to hardware wallets. For one, popular offerings from companies such as Ledger and Trezor can be quite expensive. And though losing your wallet isn’t the end of the world, you will need a recovery seed to regain access to your crypto. Losing your recovery seed means you’re pretty much out of luck. 

Which type of software wallet is best for me?

There are several types of software crypto wallets that you can access on your computer or mobile devices. Which one is best for you depends on your personal situation, but here’s a breakdown of some common types.

Desktop wallets

Desktop wallets are apps that run on your computer and store cryptocurrencies. There is no third party involved, so you are responsible for the security. For this reason, you’ll probably want to have antivirus software installed on any computer where you’re using a desktop wallet.

Mobile wallets

A mobile wallet is a crypto wallet app that lets you store and control your cryptos on your smartphone. Available on iOS and Android, these are convenient for face-to-face payments. Many mobile wallets also use QR codes, which can be scanned for quick transactions.

Web wallets

This online-based crypto wallet can be accessed via desktop or mobile, allowing you to store and send crypto from anywhere. However, since your passwords are kept on online servers, there’s an increased risk of theft.

How to set up a crypto wallet

To set up a crypto wallet, you’ll need to enter your personal information and set up a security password. Similar to banking security, there is usually a two-step verification process to go through to set up your cryptocurrency wallet. 

Non-custodial crypto wallets usually require some kind of app. You shouldn’t need to store any personal information or even give an email, but it’s important to record your private key in a safe place. If you lose or forget this key, you won’t be able to access your cryptos.

As mentioned above, the most popular hardware crypto wallets are produced by Ledger and Trezor. Though hardware wallets can be pricey, it’s a good idea to only buy a hardware wallet from a verified seller and avoid the second-hand market altogether. After you’ve purchased the device, you’ll need to download the software to accompany it from the official company website.

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How to choose the best crypto wallet

The best crypto wallet for you will depend on your level of experience and previous activity with cryptocurrencies. The main areas to consider include:

  • Security. Traditional banking apps offer a range of security options to protect your money. Each crypto wallet will have slightly different security aspects, so you should check these carefully before putting your trust—and money—into them. 
  • Fees. How transaction fees are charged can vary. They can be automatically set to make transactions quicker, but if you want to cut costs, some crypto wallets allow you to customize each fee. Just be aware that this can slow down transaction times.
  • Cryptocurrencies. Some crypto wallets offer a wide variety of cryptocurrencies, while others are more limited. Think about how often you might need to swap between currencies, as this will guide you on the level of capability you need.
  • Customer support. Some companies offer 24/7 support as part of their service. Always review the level of support you get, as it can vary greatly in terms of response times and the type of queries they deal with.
  • Access. Where and when you trade cryptocurrencies should guide you on which crypto wallet to use. If you’re using a computer regularly, you might want to look at hardware and desktop wallets. For those who need to be more mobile, smartphone apps and browser-based wallets might be more suitable.

As with any banking service, finding the right crypto wallet for your needs is important, so take some time to find the one that works best for you.

What is the best wallet for Bitcoin in Europe? 

The best wallet for Bitcoin in Europe depends on your needs — like whether you prioritize security, ease of use, or access to a wide range of cryptocurrencies. Here are some examples: 

  • Ledger Nano X: This hardware wallet is known for its security features, including a secure element chip that keeps your private keys safe. It supports over 100 cryptocurrencies, including Bitcoin, and is compatible with desktop and mobile devices. The price ranges between €79-140 and shipping is free​​.
  • Trezor Model T: Also a hardware wallet, it’s known for its robust security measures and support for over 1,000 cryptocurrencies. It's beginner-friendly with a simple setup process, although it comes at a higher initial cost. Trezor Model T is compatible with various operating systems and offers features like direct purchase of assets.
  • N26: N26 Crypto is a convenient solution integrated right into the N26 banking app. The platform is user-friendly and suitable for crypto beginners, and users can manage their traditional and digital currencies all in one place. N26 Crypto supports almost 200 cryptocurrencies, including Bitcoin, Ethereum, and Cardano​​. Users can start trading with as little as €1, with a fee structure of 1.5% for Bitcoin and 2.5% for other cryptocurrencies. Fees may be higher for special coins, but fees are lower for N26 Metal users​​. N26 partners with Bitpanda Asset Management GmbH for its cryptocurrency trading services, ensuring a secure and regulated trading environment. This partnership adds an extra layer of security for users, because cryptocurrencies are kept in custodial storage managed by Bitpanda. Fees and cryptocurrency prices are set by Bitpanda, not N26. 

What is a hardware crypto wallet?

A hardware crypto wallet is a physical device, which stores your private keys offline, and is therefore not accessible via the internet. They are often small, plug-in devices, similar to a USB stick. Your cryptocurrency transactions are recorded in the blockchain and accessed using this private key. If the system were to be hacked, these offer a higher level of security that may give you more peace of mind.

What is a crypto wallet app?

A crypto wallet app is a downloadable piece of software, available via the App Store or the Google Play store. The app stores the private keys that are needed to access your cryptocurrencies. It can be accessed via your mobile phone or on another portable device, similar to how online banking apps work. Crypto wallet apps are great if you think you’ll need to access your crypto wallet on the go.

How do I back up my crypto wallet?

To protect against computer failure or software issues it’s good practice to back up your crypto wallet. How you do this will depend on the software you are using. For example, Bitcoin wallets will ask you to generate and record a 12-word backup phrase that you can use to restore your wallet if you lose access. These can sometimes be a 24-word phrase, but the process will be similar with all companies. Make sure you look into what you need to do with your particular software, so you’re ready to back it up when needed.

What cryptocurrencies can I keep in my crypto wallet?

It depends on the type of crypto wallet you have. Some are able to hold only selected currencies, while others can deal in multiple currencies. Crypto wallets that allow the storing of different cryptocurrencies can be much easier than using a different wallet for each currency. Depending on whether you tend to stick to one form of currency or go between different ones should therefore be a factor you consider when choosing the best crypto wallet for you.

What is cryptocurrency custody?

With a custodial wallet, a third party gets custody of a user's private keys and takes responsibility for managing their wallet, authorizing transactions, and protecting the client's assets.

What is a Bitcoin wallet?

Bitcoins are stored in a “digital wallet” or “Bitcoin wallet.” In its simplest form, this functions much like a regular wallet, but instead of physical notes and coins, it stores the cryptographic keys needed to access all the Bitcoins associated with it.

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