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A common misconception is that crypto wallets store cryptocurrencies.
In reality, the assets are stored on the blockchain, while the wallets hold the private keys that allow you to acquire and transfer crypto.
In other words, crypto wallets prove that you own a specified amount of a particular cryptocurrency.
Since a wallet contains the keys, it is more of a keychain than a wallet in the traditional sense.
Think of the public key as your personal home address in the digital world. You share it with people so they know where to send you crypto.
Similarly, just as you keep your home key private, the private key acts as the key to your digital "home."
It grants you access and control over your assets, allowing you to manage and transact with the crypto you own.
Based on who controls the keys — the wallet provider or you — there are custodial and non-custodial wallets.
Both have pros and cons and allow you to buy, earn, and borrow crypto.
Custodial wallets provide convenience and support, offering features like password recovery.
However, they require trusting a third party with the security of your keys.
Non-custodial wallets give you full control over your keys, yet they may be less user-friendly.
For example, losing the private keys in a non-custodial wallet can result in a permanent loss of access to your funds.
Hint: Think of wallets as keychains.