What is a crypto wallet?
Crypto wallets are digital storage devices which hold the keys to your cryptocurrency and assist with transactions and application interactions.
A wallet is an interface which reads the blockchain and reports account information like crypto, token and NFT balances.
Wallets are an interface to transact with third party applications like exchanges, DeFi trading platforms or NFT marketplaces.
Each wallet is identifiable with a public key and corresponds with a private key to encrypt and decrypt transactions.
Together they enable the blockchain to verify the status of assets.
These interactions occur on desktop applications, web browser extensions, web-based apps and on mobile devices.
Crypto wallets are divided into two main categories: hot and cold.
Hot wallets are used for transferring crypto and interacting with third party application.
Cold wallets are used for long term storage of crypto, NFTs and other digital assets. A cold wallet is a secured device that does not interact with third party applications.
These physical devices require you to physically enter a pin code before assets can be added or removed.
Crypto wallets diverge again between custodial and non-custodial.
The Backpack wallet is a non-custodial wallet meaning that you have complete control over your own data and assets. Users of Backpack have complete discretion over their private keys.
Custodial wallets (most typically on crypto exchanges) do not grant users access to the private key portion of the wallet.