Crypto Wallet & Private Keys

A common misconception is that a wallet holds your coins the way a physical wallet holds cash. It does not. Balances exist on the blockchain; the wallet holds the private key that authorises spending from your address. Whoever holds the key controls the funds, which is the whole of crypto custody in one sentence.

Custodial wallets have a third party — usually an exchange — hold the keys for you. This is convenient and recoverable if you forget a password, but it means your assets depend on that company’s security and solvency. Non-custodial wallets put the keys in your hands alone.

Hot wallets stay connected to the internet, making them practical for frequent transactions but reachable by attackers. Cold wallets keep keys offline on a hardware device or on paper, which is far safer for long-term holdings and far less convenient for daily use.

The seed phrase — typically twelve or twenty-four words — can regenerate your keys and therefore your entire wallet. Anyone who obtains it owns your funds. It should never be typed into a website, photographed, or stored in a cloud service, and no legitimate support agent will ever ask for it.

TrustFinance covers custody arrangements in its exchange reviews, including whether client assets are segregated and how they are held.