Okay, we understand that cryptocurrencies are not “physical” items. They’re completely digital. We also know that people store their digital coins in a “wallet,” the same way we store physical coins and paper money in wallets. Not to cause more confusion, but that’s not how digital wallets work. Here’s a primer on digital wallets, what they are, what they store, and how they work.


Wallets Store Your Private Keys (Access Codes), Not Your Digital Coins

Blockchains are virtually impenetrable. A hacker will not steal a few blocks off your blockchain. It doesn’t work that way. But a hacker can steal your private keys and access your account. To safeguard access to your digital coins, wallets were designed to store your private keys and cryptocurrency address (not your coins).

A cryptocurrency wallet is essentially a digital software program designed to encrypt your private access information. It also enables you to receive and send digital currencies and view your balance.

Here’s an example of a key: 0xBA43a69Ab4931f1cAc78482E8a14a6dBaCA2b150


Hard Wallets:

Hard wallets (short for “hardware” wallets) provide an extra layer of security when monitoring, sending or receiving digital coins. Hard wallet devices come with a security chip that allow you to access your coins without having to input your private information on a computer (as computers are vulnerable to hacking). If you lose your device, you can replace it with another and input your “seed words” (like a password) that you received with your first wallet.


Soft Wallets:

There are three kinds of software wallets: desktop, mobile, and online wallets.

  • Desktop wallets exist on your computer’s hard drive. The main advantage of the desktop format is that it gives you complete control over your digital currencies. The risk is that your computer can get hacked.
  • Mobile wallets allow you to access your coins via mobile phone app. This format provides you with easy and efficient access, though it comes with the same disadvantages as the desktop format.
  • Online wallets are web-based wallets that allow you to access your account from anywhere. The only caveat is that since your keys are stored by a third party, you must do everything you can to ensure that their digital security measures are both stable and reliable.


Paper Wallets

A paper wallet is the most reliable way to safeguard your cryptocurrencies from hackers. A cold storage solution, meaning that it is “offline” or not connected to the internet, a paper wallet is a scannable piece of paper containing your private key and cryptocurrency address. The caveat here is that if you lose your paper wallet and have no backup copy, you can permanently lose access to your account.


The risk of loss in the trading of stocks, options, futures, foreign exchanges, foreign equities, and bonds can be substantial and is not suitable for all investors. Trading on margin or the use of leverage is not suitable for all investors and losses exceeding your initial deposit is possible. Supporting documentation is available upon request. Trading futures, options on futures, and foreign exchanges involves substantial risk of loss and is not suitable for all investors. Carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources and only risk capital should be used. Opinions, market data, and recommendations are subject to change at any time. The lower the margin used the higher the leverage and therefore increases your risk. Past performance is not necessarily indicative of future results.