currency wallet) The electronic interface to a user's crypto. A cryptocurrency wallet is software in the computer or mobile device that allows people to buy, sell and trade cryptocurrency coins and tokens. Although Bitcoin is the most widely known cryptocurrency, there are countless others, and any given wallet may support several. In contrast, users can open an account with a cryptocurrency exchange and have them manage their crypto. See Bitcoin wallet
A wallet does not hold the coins or tokens. It maintains the cryptographic keys to access them on the blockchain. If a user's wallet is hacked, the crooks have access to the owner's assets. If the wallet is deleted, and the keys were never saved, the asset ownership is lost forever. Wallets can also be contained in hardware, which is safer that software (see cold wallet
Many crypto investors rely on a centralized crypto exchange such as Coinbase or Binance to hold their balances. The exchange maintains the wallet interface and has complete custody of the keys. However, if the exchange is ever hacked, users may lose funds. See crypto exchange
Non-Custodial - Hierarchical Deterministic (HD)
Non-custodial HD wallets are downloaded and maintained by the user, and MetaMask, Digital Bitbox and Jaxx are examples. The HD wallet derives the private keys from a randomly generated "seed" created at startup. If the wallet is ever destroyed, only the seed is required to restore the private keys.
Rather than a complicated password, the seed is 12 to 24 everyday words that are easy to save (see below). The HD wallet (BIP-32 standard) generates the private keys from the seed in a tree structure, and the different branches (private keys) can be used to organize payments for different purposes such as departments in a company or type of purchases. In addition, a new public key can be created for each transaction that can be published anywhere.
Non-Custodial - Nondeterministic
In contrast to the HD (hierarchical deterministic) wallet, the earlier nondeterministic approach generated a private key for each transaction using a random number. Known as "just a bunch of keys" (JBOK), this was cumbersome because multiple private keys had to be backed up in order to keep track of all the user's coins. See MetaMask
Ledger Nano S "Cold" HD Wallet
A Paper Wallet
Nano S hardware wallets support Bitcoin, Ethereum, etc. and cannot be hacked when offline. When first used, 24 everyday words are generated as the seed (two examples at top) to create the private key. If the device is ever lost or destroyed, the words are used to recover the private key. See cold wallet
This paper wallet was generated from a Bitcoin ATM, and its QR codes can be scanned to import the coins into a digital wallet app or make another ATM transaction. The Bitcoin private key is used to send coins and the public key is used to receive them. See Bitcoin ATM