Crypto Wallet: What It Is, How It Works, and Types

By Rachel Warren – Updated May 15, 2025 at 12:46 PM | Fact-checked by Frank Bass

Key Points

Crypto wallets store private keys, which are crucial for managing and accessing cryptocurrencies.
Choose between custodial for convenience or noncustodial for full control.
Secure your private keys well to prevent unauthorized access to your crypto.

A cryptocurrency wallet is a digital tool for storing, managing, and accessing digital assets like Bitcoin (BTC +2.51%) and Ethereum (ETH +5.67%). It's like a digital purse that holds your private keys, which are like passwords that allow you to control your cryptocurrency. Crypto wallets also enable you to send and receive cryptocurrency, view your balances, and interact with decentralized applications.

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Cryptocurrency

Cryptocurrency is decentralized and secure digital money, based on blockchain technology, that offers new investment opportunities.

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A crypto wallet doesn't store the actual crypto but rather the private keys that grant access to the cryptocurrency on the blockchain. These keys are essential for sending, receiving, and spending digital assets.

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A smartphone with a cryptocurrency wallet. — Image source: Getty Images.

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An infographic defining the different types of blockchain wallets. — Image source: The Motley Fool.

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There are various types of wallets, including hot (software) wallets and cold (hardware) wallets. Hot wallets are convenient but may be more vulnerable to security breaches, while cold wallets offer greater security but can be more complex to use.

Regardless of the wallet type, keeping your private keys safe and secure is essential. If your private keys are compromised, anyone can access your crypto holdings.

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About the Author

Rachel Warren is a contributing Motley Fool stock market analyst covering pharmaceuticals, biotechnology, medical devices, information technology, and consumer goods. Prior to The Motley Fool, Rachel was a paralegal and legal administrator. She holds a bachelor’s degree in paralegal studies from Liberty University School of Law.

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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.