A wallet (also known as a crypto wallet) is a tool that allows people to send and receive blockchain assets like cryptocurrencies and digital collectibles. In many ways it’s like a regular wallet that stores cash, but with two main exceptio
By Geoffrey Lyons
Published on Aug 8, 2024
Last modified on Aug 22, 2024
Crypto transactions are secured by a pair of keys, one public and one private, in such a way that only the owner of the private key can access their funds.
One way to visualize this is to picture a mail slot: it receives letters because senders know the home address, but only the homeowner can unlock the door and retrieve the letters.
That’s basically how a crypto transaction works. There’s a wallet address or “public key” used to receive a transaction (much like a home address) and a password or “private key” used to access it (much like a key to the front door). A wallet is nothing more than the “key pair” used to send and receive crypto.
What happens if someone loses their wallet? Fortunately wallets have a recovery mechanism called a seed phrase: 12-24 simple words (e.g. “cat”, “ice”, “tree”) that, when provided in the correct order, recover lost funds.
Further reading: What is a crypto wallet? An introduction to digital wallets
The many different types of crypto wallet can be categorized by their connectivity (online or offline) and custody (whether or not they’re managed by someone else).
*a paper wallet is a piece of paper with one’s private key and seed phrase printed on it.
Did you like this article? Sign up to our weekly MoonPay Minute newsletter to get similar content delivered directly to your inbox.
