All wallets do the same job: hold keys and sign transactions. They differ in where the keys live and who controls them.
Custodial vs self-custody
With a custodial wallet, a company (a custodian) holds the keys. Easy, but the company can freeze, lose or misuse the coins. With self-custody, you hold the keys through a seed phrase.
Hot wallets (keys on an online device)
- Mobile: convenient for daily spending and small amounts.
- Desktop: more features such as coin control and connecting to your own node.
- Web/browser: most exposed to phishing and malicious extensions.
Cold storage (keys kept offline)
- hardware wallet: keys stay on a device and you confirm on its screen. The common choice for savings.
- Air-gapped signers: never connected by cable; they exchange psbts by QR code or memory card.
- Paper wallets: outdated and easy to misuse. Not recommended for beginners.
Multisig
A multisig wallet needs, for example, 2 of 3 keys to spend. No single lost or stolen key is fatal, but setup and backups are more complex.
Lightning wallets
For fast small payments. Some are custodial, some self-custodial; see Lightning in practice.
A common setup
| Use | Wallet |
|---|---|
| Spending money | Mobile or Lightning wallet |
| Savings | Hardware wallet |
| Large or family savings | Multisig |
Takeaway
Match the wallet to the amount, like a wallet in your pocket versus a safe at home.