What are Cryptocurrency Wallets?
- Irene Goetz
- Jun 8
- 4 min read
A cryptocurrency wallet is required to use cryptocurrency. This post gives a beginner-level description of this crypto essential, including types of wallets and the pros and cons of each.
A crypto wallet is software that enables you to manage your cryptocurrency. It is like a physical wallet in the sense that you can store (digital) money in it and take out that money to make transactions. A slightly more technical definition of a crypto wallet from the CoinSutra website is: “A Crypto wallet is an app that lets you interact with the blockchain. A crypto wallet provides the interface to send and receive cryptocurrencies.” (1)
Each crypto wallet has a unique number associated with it that identifies that wallet on the blockchain. This is called the wallet address and it looks like this:
1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa
This particular wallet address is the one associated with the mysterious Bitcoin founder Satoshi Nakamoto (2).
Each crypto wallet stores the cryptocurrency private and public keys. The keys look similar to the wallet address. They are a combination of numbers and upper- and lower-case letters. The public key is associated with your wallet and is publicly visible. The private key is like a password. Both are required to access your wallet.
The private key to your wallet should always be kept safe. If someone else has your private key, they can access your wallet and take control of your crypto. Recently there has been a rise in kidnapping incidents where criminals try to steal private keys and access the victim’s crypto wallets (4). In May 2025 a man was kidnapped in Manhattan and tortured for weeks by a fellow crypto investor who was trying to get the victim’s private key (5).
Types of Crypto Wallets
There are two main categories of crypto wallet: hot and cold. Within the hot category there are three subtypes: web, desktop, and mobile. Within the cold category there are two subtypes: paper and hardware (see Figure 1). Each has its own advantages and disadvantages. It is important to weigh these carefully when choosing a type of wallet.
Figure 1: Categories and Subtypes of Cryptocurrency Wallet (3)
Hot Wallets
The term hot wallet means a crypto wallet that can connect to the Internet. Hot wallets are faster and more convenient to use but are considered less secure than cold wallets.
Mobile
These are hot wallets available on your mobile device as an app
Pros
Convenient
Easy to use on the go
Easy to use for purchases on the Internet
Often free
Cons
Susceptible to mobile viruses or malware
Your crypto can get stolen or lost if your mobile phone is lost, stolen, or compromised
Web
Web wallets are stored on web pages or online platforms. These are considered the least secure since your private key(s) are stored on a third-party’swebsite or server.
Pros
Easy to use and access
Free
Cons
Least secure option, vulnerable to online compromise
Easier for a user to be scammed
Desktop
A desktop wallet is installed on your desktop computer. With a desktop wallet your public and private keys are stored on your computer’s hard drive. It is vulnerable to hardware failure and online threats like hacking.
Pros
Less vulnerable to certain online threats
Not as susceptible to theft as a mobile phone
Free
Cons
Vulnerable to hacking when connected to the Internet
May be inaccessible if the desktop computer has a hardware failure
Cold Wallets
A cold wallet is a crypto wallet that does not connect to the Internet. These have a physical component. They are considered more secure than hot wallets but are vulnerable to physical damage or theft.
Hardware
A hardware wallet stores your keys on a physical device like a detachable hard drive or a USB stick. This is considered one of the most secure types of wallets as it is not vulnerable to online attacks.
Pros
Most secure from online attacks
Good for long-term storage
Good for storing large amounts of crypto
Portable
Cons
Less convenient to use
Vulnerable to physical damage or theft
Costs money - around $50 to $250 for an external device
Paper
A paper wallet is a crypto wallet printed on a piece of paper. The paper wallet has the wallet’s address, public key, and private key printed on it. It does require the use of paper wallet generator software to initially get the keys.
Pros
Low tech
Highly accessible to a wide number of people
Very low cost
Secure from online threats
Portable
Cons
Very vulnerable to physical damage – e.g. water, fire, getting crushed or torn
More prone to user error in copying keys to paper
Easy to lose
Can be easily (physically) stolen
Conclusion
A crypto wallet is an essential tool for using cryptocurrency. When deciding on which type of wallet to use you must carefully weigh the pros and cons of each type. Hot wallets are generally more convenient than cold wallets but are less secure. A cold hardware wallet is often recommended for storing large amounts of crypto. Carefully consider your individual needs, goals, and the security risks of each type of wallet. Crypto experts often recommend using more than one type of wallet and advise users to develop a solid backup strategy in case one wallet fails.
References
2. Danial, Kiana; Laurence, Tiana; Kent, Peter; Bain, Tyler; Solomon, Michael G.. Cryptocurrency All-in-One For Dummies (p. 29). Wiley. Kindle Edition.
6. Dania, Kiana, et.al. Cryptocurrency All-in-One for Dummies. 1st ed, For Dummies, 2022.
Written by: Jennifer MacPherson
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