A cryptocurrency wallet is a means for creating and accessing a cryptocurrency account. More generally, a wallet is a portal through which a user interacts with a public blockchain. An Ethereum wallet provides access to ETH and Ethereum applications. With a wallet, you become a user of a public blockchain. You can buy, store, send, and swap tokens.

Wallets are about security and usability. As explained below, the security is of primary importance because wallets interact with private keys. The usability, or UI/UX (User Interface / User Experience), of a wallet is secondary but also extremely important. People would be more open to using cryptocurrency if it was more user friendly. It can be difficult to interact with decentralized governance and financial structures. This is not the way we are used to doing things. Wallet providers are trying to improve this experience to reduce the barrier to entry and increase accessibility. This is the next stage of cryptocurrency adoption.

If you want to have your own cryptocurrency account, you will need to use a wallet to create one. For instance, when you download an Ethereum wallet, it will create an ETH account for you. A wallet is how you create your private key.

A wallet is also a way to manage your cryptocurrency account. This means creating, storing, and using a private key associated with the account. The private key is used to produce a cryptographic signature associated with the owner’s account (address). Wallet software creates a digital signature by processing a transaction with the private key. The private key in a wallet is a way of verifying that you own the account. In other words, it prevents transaction senders from spending other people’s coins. Therefore, it is very important that private keys be stored in a secure manner, because anyone with the private key can access the cryptocurrency in an account.

A wallet is an application for accessing and managing your account. It is owned by an individual just like a physical wallet and it functions as a window into your account that shows you your balance, transaction history, and more. A wallet provides an interface for sending and receiving value connected to an account. Instead of a message like email, an ethereum wallet can receive ETH. A person can transfer ETH to a wallet using their wallet address as the destination. You also can think of it as a login that allows you to connect to decentralized applications using your Ethereum account.

Metamask is an example of a wallet. MetaMask is an Ethereum extension that can be installed for free on your Chrome, Firefox, Opera and Brave desktop browser. The “Secret Recovery Phrase” (previously known as “seed phrase”) is a secret phrase that you use to access the digital wallet if you lose your password.

A single wallet can be connected to multiple accounts. (Can a single account be connected to multiple wallets?) Some people will have multiple accounts solely to reduce the transparency associated a single address.

Suppose that you share your ethereum address with a friend so that your friend can send you some Ether. Once your friend knows that it is your address, your friend can view all of your transactions into and out of the address. You may want to have multiple addresses for different purposes. This is a way to obfuscate (i.e., reduce transparency) your overall cryptocurrency activity across multiple addresses.

A wallet can be more secure than cryptocurrency owned on a centralized exchange. The risk of a centralized exchange is that the exchange can be hacked. When you use a digital wallet, you can store the private key in a less centralized manner. Private keys should be kept in a secure place and should not be shared with others. Private keys ensure that all transactions are signed and executed with appropriate “permissions” (only the owner of the account can send digital assets from the account).

A cryptocurrency wallet can be either digital or physical. A digital wallet is easier to use, a physical wallet is more secure.

A digital wallet is a wallet on the internet (i.e., an online, web-based wallet). The private key is stored on the internet. You can think of digital wallet as a banking app without the bank. It allows you to view your balance, make transactions, and connect to other applications. It is a tool for managing your cryptocurrency account. The wallet is simply an app for accessing an account, therefore you can change your wallet provider at any time. You still have the same account but you are using a different wallet provider to access your account. When you start using a new wallet provider, it will ask you whether you want to import an existing wallet or create a new one. Among digital wallets, you can choose between mobile wallets (for smartphone), web wallets (for web browsers), and desktop.

A digital wallet has a password, however it does not store your private key.

A digital wallet is not a custodian for your cryptocurrency account. You own the account and the wallet helps you manage the account. A digital wallet is not as secure as a physical wallet because any machine connected to the internet can be accessed remotely and the private key could be stolen. MyEtherWallet (MEW) provides an offline option for creating a private key.

A hardware wallet is a wallet not on the internet (i.e., an offline, non-web-based wallet). The private key is stored in a manner that is not connected to the internet. This could be a piece of paper or a hardware device like a thumb drive. This is often referred to as a “cold wallet” or “cold storage.” In contrast, a digital wallet is a “hot wallet.” A physical wallet is an extremely secure way of keeping your private key from being hacked. Ledger is a popular hardware wallet and Trezor is the original hardware wallet. Others are KeepKey, Secalot, and BitBox.

There are several significant risks associated with managing your own wallet. The main risk is losing your private key. If you lose the private key, you lose access to the address connected to the wallet. There are many stories about Bitcoin that is locked in addresses that individuals can no longer access because they can’t remember their private key. There is a large volume of Bitcoin that is deemed to be inaccessible.

A digital wallet does not store your private key. For instance, with MetaMask, the private key is encrypted on your internet browser’s data store and protected via a MetaMask password. MyEtherWallet does not store any user data.

One way to combine the features of a digital wallet and physical wallet is to use them together. For instance, you can use a Ledger hardware device plugged into a computer that then connects via a MetaMask plug in. This is sort of like two-step verification with a smart phone.

There is no “password recovery” service for wallets.

This is what some people don’t like about cryptocurrency and some have asked, “Why would I want to be my own bank?” For some people, the delegated custodial role for cryptocurrency makes sense. They don’t want the personal responsibility of managing a digital wallet. Also, when transferring value into a wallet, the user must make sure the address is correct because transfers are non-reversible!

One could also say, “With great power, comes great responsibility.”