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Wallet and seed phrase

A wallet holds the keys that control your crypto: a hot one is online, a cold one is not. The seed phrase is 12 or 24 words: whoever knows it controls your coins, so never show it to anyone or photograph it.

Skenuok.lt teamPublished 3 min read

What a wallet really holds

Coins "live" on the blockchain, not in the wallet. The wallet holds the private key that proves you can move those coins. A public address is derived from the key, and you can share it so others can send you funds. The key must be kept secret; the address can be shown.

The 12 words of the seed phrase in a safe, the wallet address and a crossed-out camera next to it, and a hot and a cold wallet below.
Skenuok glossary illustration: wallet and seed phrase.

Hot, cold and exchange wallets

  • A hot wallet is an app on your phone or in your browser, connected to the internet. Handy for daily use, but more exposed.
  • A cold wallet keeps the key on a separate device that stays offline. Safer for long-term storage, but less convenient.
  • An exchange account is not really your wallet: the exchange controls the keys, and you rely on its security.

Which one fits depends on the amount and how often you use the funds. People often combine them: a small amount for everyday use in a hot wallet, and a larger one for long-term storage in a cold wallet.

The seed phrase

When you create a wallet, it shows a seed phrase of 12 or 24 words. All the wallet's keys can be restored from it on any device, so whoever knows it controls your coins. The EU financial supervisors warn that losing your private keys means losing access to your crypto for good (ESMA, EBA and EIOPA warning).

Common mistakes

  • Photographing the phrase or storing it in the cloud. A photo on your phone or in your email can end up in the wrong hands.
  • Typing the phrase into a website or giving it to "support". Legitimate services do not ask for it, and a request like that is almost always a scam.
  • Sending funds without checking the address and network. A blockchain transfer cannot be reversed, and the network fee is paid either way.
  • Keeping everything on an exchange and calling it a wallet. An exchange account depends on how sound the exchange is.
  • Believing someone will "recover" lost funds for a fee. Promises like that are a common sign of a follow-up scam.

How to practise

Set up your first wallet with no money in it. Write the phrase down on paper, delete the app and restore the wallet from the phrase: that way you know the phrase is written correctly. Only then try a small transfer and check that it arrived. The full plan for getting started is in How to start trading crypto.

RiskCrypto can be lost to scammers, hacks or your own mistakes, and blockchain transfers cannot be reversed. This content is for education only and is not financial or investment advice. Crypto trading carries a high risk, and you can lose all the money you put in.

Frequently asked questions

Can I restore a wallet without the seed phrase?
Usually not. If you lose both the device and the phrase, you will not get access back. That is why a copy of the phrase needs the same care as the funds themselves.
Does a beginner need a cold wallet?
It depends on the amount and how long the funds are held. For larger sums held long term, a cold wallet is the more common choice. Either way, the device matters less than keeping the seed phrase safe.
How is a seed phrase different from a password?
A password protects access to the app on that device. The seed phrase is the key to the funds itself: with it, the wallet can be used anywhere, even without the password.

You can review and test yourself on these terms in the Skenuok app.

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Related terms

Exchange (CEX and DEX)A place where you buy and sell crypto. A centralized exchange (CEX) is run by a company, while on a decentralized one (DEX) you trade straight...BlockchainA public ledger of transfers made of blocks, each linked to the previous one. Its records cannot be quietly changed.StablecoinA coin whose price is pegged to the dollar or another stable asset, e.g. USDT or USDC. It is meant for holding value, not for profiting from price...Coin, token and market capA coin has its own network (BTC, ETH), while a token runs on another network. Market cap is the price multiplied by the number of units in...Network fee (gas)A fee for a transfer or other action on a blockchain. It is paid to the network, not the exchange, and rises when the network is busy.FOMO, FUD and HODLFOMO is the fear of missing out that pushes you to buy without a plan, and FUD is news that spreads fear. HODL means holding for the long run...