Wallets, addresses and keys
A wallet does not hold your coins. It holds the keys that control them, and whoever has the keys has the money.
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The word wallet is misleading. Your coins never sit inside the app on your phone. They live on the blockchain, recorded under your address. The wallet app holds the keys that let you move them.
Three things every wallet has
| What | What it looks like | Who may see it |
|---|---|---|
| Address (public key) | A string of 32 to 44 letters and numbers, often shortened to something like 7xKX...9pQa | Anyone. You share it to receive SOL. |
| Private key | A longer string of letters and numbers | Only you. It signs your transactions. |
| Seed phrase | 12 or 24 ordinary English words in a fixed order | Only you. It can rebuild every key in the wallet. |
Your address is public. Give it to an exchange, a friend or a bot so they can send you SOL. Nobody can take money out of your wallet with only your address.
Your private key is what moves money. Every time you buy, sell or send, the wallet uses it to sign the transaction, which proves the order really came from you.
Your seed phrase, also called a recovery phrase, is the master key. From those words, any wallet app can rebuild all of your private keys. That is why the next lesson is about nothing else.
Signing: the button that matters
Whenever a website or app wants to do something with your coins, your wallet pops up and asks you to approve it. That approval is a signature. Most of the time it is exactly what you wanted: a buy, a sell, a payment. But a fake site can ask you to sign something that sends everything you own to a thief. Never approve a request you did not start, and read what the pop-up says it will do.
Who holds the keys?
- Self-custody. You hold the keys in your own wallet, such as Phantom. Nobody can freeze your SOL or lose it for you. Nobody can rescue you either.
- Custodial. A company holds the keys for you, like an exchange account. If you forget your password, they can help you back in. But they can also freeze your account, and if the company fails, your money can fail with it. When the FTX exchange collapsed in 2022, its customers waited more than two years to get money back.
People in crypto say: not your keys, not your coins. An exchange is fine for buying SOL. For memecoins you need your own wallet, because new memecoins trade on the blockchain itself, long before any exchange lists them, if one ever does.
Hot and cold wallets
A hot wallet is an app on a device that is online, like Phantom on your phone or in your browser. It is quick and easy, and right for the small amount you trade with. A cold wallet, or hardware wallet, is a small device such as a Ledger or a Trezor that keeps the keys offline and signs only when you press its buttons. It is slower, and it is the safer home for savings.
Two people, one dropped phone
Maria and Tom each hold 3 SOL in a phone wallet, about $300. Both phones fall into a lake on the same day.
- Step 1: Maria wrote her 12 words on paper when she made the wallet. She installs the same app on a new phone, picks the import option, types the 12 words and sees her 3 SOL again within minutes.
- Step 2: Tom never wrote his words down. The app was the only place his keys lived. His 3 SOL are still on the blockchain, under his address, and nobody on earth can ever move them again.
- Step 3: The coins were never in the phone. Only the keys were. Maria had a copy of the keys, and Tom did not.
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This guide is for learning. It is not financial advice. Most memecoins go to zero and most people who trade them lose money. Only ever trade what you can afford to lose.