Crypto wallets and self-custody: keys, seed phrases and staying safe

A crypto wallet doesn't actually store coins. The coins live on the blockchain. Your wallet stores the keys that prove you're allowed to move them. Whoever has the keys controls the crypto.

Keys and seed phrases

• Public address: like an account number. Safe to share so people can send you crypto.
• Private key: like a master password that can move everything. Never share it.
• Seed phrase (recovery phrase): usually 12 or 24 words that can recreate all your private keys. Anyone who sees it can take everything in the wallet.

Exchange custody vs. self-custody

When you leave crypto on an exchange, the exchange holds the keys and you hold an account with them. It's convenient and you can reset a forgotten password, but you depend on the exchange staying honest, secure and solvent. With self-custody you hold the keys yourself: nobody can freeze or lose your funds for you, but nobody can recover them if you lose the seed phrase either.

Hot and cold wallets

• Hot wallets are apps on your phone, browser or computer. Handy for small amounts and everyday use, but exposed to malware and phishing.
• Cold wallets (hardware wallets) keep keys on a small device that signs transactions offline. Better for larger, long-term holdings. Buy one directly from the maker, never second-hand.

Protecting your seed phrase

• Write it on paper or stamp it on metal. Don't store it in photos, e-mail, cloud notes or password files.
• Keep it somewhere private and safe from fire and water. Some people keep two copies in different places.
• Never type it into a website, and never enter it into a wallet you just installed from a link.
• Test your backup with a small amount before you rely on it.

Signing transactions safely

Connecting your wallet to an app and signing transactions can give that app permission to move your tokens. Read what you're approving, be suspicious of unexpected "approve" or "permit" requests, and remove old approvals from time to time.

Plan for your family

If something happened to you, could your family find and use your crypto? Consider leaving clear instructions with your will, without writing the seed phrase itself into documents other people can read.