Crypto Wallets Explained: Hot vs Cold, Custodial vs Self-Custody

5 min read · Updated Nov 11, 2026

A crypto wallet doesn't actually hold coins; coins live on the blockchain. A wallet holds the private keys that prove you own them.

Custodial vs self-custody

On an exchange, the exchange holds your keys (custodial). It's convenient, but you rely on that company. With a self-custody wallet you hold the keys and nobody can freeze your funds, but you're fully responsible for backups.

Hot vs cold

Hot wallets (apps, browser extensions) are online and handy for daily use. Cold wallets (hardware devices) keep keys offline and are best for long-term savings.

Protect your seed phrase

• Write it on paper or metal, never in a screenshot or cloud note.
• Store copies in two safe places.
• No real support agent will ever ask for it.

This guide is educational and not financial advice.