Wallet
A software application or hardware device that stores the cryptographic private keys needed to access and manage cryptocurrency holdings. Despite the name, wallets don't actually store crypto — the assets exist on the blockchain. The wallet stores the keys that prove ownership and authorize transactions. Wallets can be hot (internet-connected) or cold (offline).
“MetaMask is a popular browser-based hot wallet for interacting with Ethereum DeFi. For long-term storage, many users keep funds on a Ledger hardware wallet (cold storage).”
Private Key
A secret cryptographic code, typically a 256-bit number, that proves ownership of cryptocurrency and authorizes transactions. The private key is mathematically linked to a public key through elliptic curve cryptography — it can generate the public key, but the public key cannot reverse-derive the private key. Anyone with access to a private key has complete, irrevocable control over the associated funds.
Seed Phrase (Recovery Phrase)
A series of 12 to 24 words, generated following the BIP-39 standard, that serves as the master backup for a cryptocurrency wallet. The seed phrase deterministically derives all private keys and addresses in a wallet, meaning anyone with the phrase can fully restore the wallet on any compatible device. Losing the seed phrase means permanently losing access to the funds.
Hardware Wallet
A physical device specifically designed to securely store cryptocurrency private keys offline in a tamper-resistant secure element chip. Hardware wallets sign transactions internally without ever exposing private keys to an internet-connected computer, protecting against malware, phishing, and remote attacks.
Hot Wallet
A cryptocurrency wallet that is connected to the internet, enabling quick and convenient access for frequent transactions. Hot wallets include browser extensions, mobile apps, and exchange wallets. While more convenient than cold storage, they are more vulnerable to hacking and phishing attacks.