Introduction

In the context of blockchain and cryptocurrencies, wallets are digital tools that enable users to store, send, and receive digital assets securely. These wallets come in different forms—such as hardware wallets, software wallets, and web wallets—each offering a balance between security and convenience. Similar to how browsers serve as your gateway to the internet, wallets serve as your gateway to interacting with web3. Crypto wallets also help you manage permissions with whom you share your data, store cryptocurrency, NFTs, and more.

Self-custody

One of the most important features of blockchain wallets is self-custody, where users maintain full control over their private keys. The moment your crypto wallet is created, a unique phrase is generated, known as a “seed phrase” or a “recovery phrase.” You can think of this 12-word phrase as a master password that you need to keep secret and secure. This means that users are the sole custodians of their assets, allowing them to independently verify their balances and transactions without relying on third parties.

Public addresses and private ownership

A blockchain wallet consists of two key components: public address and a method of securing ownership (private key or smart contract rules). The public address is what users share to receive assets, functioning similarly to an account number or username in traditional online services. The method of securing ownership, varies depending on the type of wallet. There are two fundamental types of wallets:

• Private key wallets, often referred to EOAs (externally owned accounts). In this wallet type, the private key is used to sign transactions and verify ownership of the associated wallet.
• Smart contract wallets, often referred to as smart accounts. In this wallet type, their ownership rules can be customized through code which enables more complex functionalities such as multi-signature approvals (multisig), batched transactions, and more.

The choice of a wallet and the method used to back up a wallet are important decisions given the irreversible nature of blockchain transactions. To learn more about wallets and explore potential options, you can refer to this guide from the Ethereum Foundation.