When a user creates a crypto wallet for the first time, it is often perceived as a familiar bank account – a place where funds are “stored.” However, in blockchain systems, assets are not kept inside applications or on service servers. All balance information is recorded in a distributed network. A wallet merely provides an interface to access these records.

The core element is the private key. This is a unique cryptographic code that confirms the right to manage the assets of a specific address. Whoever owns the private key owns the assets. Losing the key means permanently losing access. Sharing the key with third parties is equivalent to transferring ownership.

Based on the key storage model, wallets are divided into two types. Custodial wallets rely on centralized key storage managed by a service provider. Users gain convenience, account recovery options, and support, but effectively entrust control to the platform. Such solutions are commonly used by exchanges and online swap services.

Non-custodial wallets grant full control to the user. Keys are generated and stored only on the user’s device. This increases ownership security but requires independent protection of the seed phrase and backups. In this model, user errors cannot be corrected by customer support.

A separate category includes hardware wallets. They store keys in an isolated device that is not directly connected to the internet, reducing risks of hacking and phishing.

The crypto industry has long embraced the rule: “not your keys – not your coins.” Understanding this principle is the foundation of secure interaction with digital assets, whether for investment, trading, or exchange operations.

As Web3 evolves, more users are shifting toward self-managed wallets, shaping a new model of financial independence where responsibility for assets belongs not to a bank or service, but to the owner.

Crypto Wallets: Where Are Your Assets Actually Stored?