A cryptocurrency wallet allows you to store, send, and receive cryptocurrency on the blockchain.
Your wallet is a combination of a public and a private cryptographic keys that are used together to access your cryptocurrency.
Each crypto wallet also has a wallet address. Your wallet address is used to send and receive cryptocurrency. This means that you can safely share your wallet address with others.
There are different types of crypto wallets. Depending on the type of crypto wallet you have, your access to your private keys and recovery phrase will vary.
Software vs. Hardware Cryptocurrency Wallets
- Software Wallet: A software wallet is also known as a hot wallet and is a browser or mobile app based wallet. There are two kinds of software wallets - custodial wallets and self-custodial wallets.
Hardware Wallet: A hardware wallet is also known as a cold wallet. It is a piece of hardware that stores your private keys on a secure physical device. A hardware wallet is a type of self-custodial wallet.
Your private keys are not stored on an online server, which makes a hardware wallet the most secure option. If you lose your recovery phrase, you can lose access to the crypto you own.
Custodial vs. Self-Custodial Cryptocurrency Wallets
Custodial Wallet: A custodial wallet is a wallet in which an exchange (the wallet provider) holds your private keys and securely stores your funds.
This is similar to how a traditional bank is responsible for securing your account and funds.
A custodial wallet requires you to log in with a username and password in order to process transactions. If you forget this password, it can usually be replaced. This feature makes a custodial wallet an easy option to buy, sell, and hold cryptocurrency.
Self-Custodial Wallet: A self-custodial wallet is a wallet in which you hold your private keys and are responsible for securely storing your funds.
When you set up a self-custodial wallet, like the Uniswap Wallet, you are given the private key and recovery phrase. It is important to remember that anyone who has access to your recovery phrase can access your wallet. Do not share your recovery phrase with anyone else.
You can connect your self-custodial wallet to access the full range of DeFi and web3 decentralized applications (dapp), including Uniswap. It is important to emphasize that no one can help you regain access to your funds if you lose the private key and recovery phrase in a Self-custodial wallet.