A cryptocurrency, or digital, wallet is generally an online software that stores all the secret information about access to your digital assets and allows its user to conduct bitcoin transactions. Contrary to popular belief, cryptocurrency wallets (often simply crypto wallets), or programs that enable cryptocurrency owners to access such funds, do not actually store the digital assets – rather, they hold public and private keys.

If you’re interested in owning cryptocurrency, the first step is finding the right wallet. Crypto wallets are the digital currency equivalent of a bank account. Online wallets will present the user with the balance in their account, offer charts that illustrate the change in value over time, and provide the ability to send and receive additional currency with ease.

How Does a Crypto Wallet Work?

Cryptocurrency Wallets refer to the method of storage by which a user accesses, sends, and receives crypto. Depending on the type of wallet, there are varying levels of complexity and security afforded to the user. 

Public and Private Keys

Cryptocurrency wallets utilize keys to maintain security. A public key is a string of numbers and letters that identify a wallet. When one user transfers cryptocurrency to another, it is through such a public address. Public keys are anonymous and cannot be used to identify a wallet or its owner. A private key, on the other hand, is the equivalent to a PIN number. This is similarly a set of alphanumeric characters. The public key is derived from the private key through a hash; it is, however, impossible to reverse-engineer the private key from the public key. In order to use cryptocurrency in a wallet, the private key stored in the wallet must match the public address to which it has been assigned via transfer – failure to do so will reverse any exchange made.

Cold Storage

Also referred to as an offline wallet, cold storage refers to the usage of a platform that does not have internet access and is thus protected from unsanctioned usage (i.e., hacking). Generally, cold storage is some form of hardware, similar to a flash-drive (or thumb-drive). Crypto wallets utilizing cold storage are generally considered more secure than other types of wallets.

Hot Storage

Any crypto wallet that is connected to the internet is referred to as hot storage. Despite being less secure than cold storage, these wallets are generally more common due to their accessibility and the number of currencies they accept. Hot storage exists through a variety of mediums: applications (desktop and mobile) and online. While these types of crypto wallets are less secure than cold storage, they are typically much more affordable, user friendly, and accessible. Further, many are accessible via seed phrases, or strings of random words. 

Types of Crypto Wallets

One of the most commonly asked questions in this space regards how digital wallets work. Crypto or digital wallets exist in both physical and digital mediums, each with their own benefits and drawbacks. The five primary types of wallets include: 

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Paper wallets are the simplest method of bitcoin storage. As the name suggests, paper wallets are documents with text that refer to the public and private keys for the given cryptocurrency. While more secure than many hot storage, paper wallets are only as secure as the individual decides to protect them. It is recommended to keep a paper wallet in a safe place in one’s home where only the user knows its location. Further precautions, such as storage in a water (and fire) proof container are also suggested.


Known for being the most secure form of storage, hardware crypto wallets are physical devices that connect to the user’s computer. This often is through the USB drive, and are inaccessible (and thus immune to attacks) via the Internet. Hardware wallets are usually expensive relative to other varieties, ranging in price from $50 to $250. They do afford often security that is not supplied by other mediums. Hardware wallets are usually recommended for users that plan to hold their cryptocurrency as a long-term investment, because of the inefficiency of frequent trading when using such a medium.


Secure desktop crypto wallets offer the user the ability to send and receive cryptocurrency through a program that is installed on their computer’s hard drive. These are typically safer than general online wallets, because they do not rely on a third-party’s server to give the user access, however they are still connected to the Internet and are thus vulnerable to remote access by sophisticated hackers. Numerous desktop wallets that exist and therefore it is important for any prospective user to do adequate research and ensure that the wallet has positive reviews.


Similar to a desktop wallet, a mobile crypto wallet gives a user easy access to their cryptocurrency through an application installed on their smartphone. Available in each application store, mobile wallets provide the convenience of sending and receiving cryptocurrency without requiring access to a computer. Users that are looking to pay with bitcoin may prefer a mobile wallet, because of the flexible spending. For all of their advantages, however, mobile wallets are frequently targeted by hacking attempts because simply taking access of one’s phone may give another the control of their cryptocurrency.

One example of a mobile app is the CrossTower Crypto Wallet.

The app leverages your smartphone’s advanced security features to provide a high level of security, which makes our wallet a reliable repository for your cryptocurrency.

Powerful features of the CrossTower Crypto Wallet include:

  • Buy Cryptocurrencies with funds from your bank account.
  • Send Bitcoin, Ethereum and other cryptocurrency to other wallets.
  • Seamlessly buy Bitcoin, Ethereum, Litecoin, Zcash and other cryptocurrencies.
  • Advanced protection of your funds using a PIN code or biometric scan.


One of the most popular solutions for crypto ownership are web wallets, many of which run on open source software or are operated by various exchanges. These wallets are, as the name suggests, purely online and are controlled by a third party. Depending on the provider, this crypto wallet may permit users to transfer funds from one wallet to another, including mobile. There are a lot of downsides to web wallets, however. There is significant reliance on the operating company.

How are Crypto Wallets Used?

Using a crypto wallet requires only three simple steps:

  1. Select the best type for your purpose.

Depending on how you intend to use your crypto, certain wallets will have advantages over others. For example, someone holding bitcoin as a long-term investment may prefer the security of cold storage, while a user who plans to actively trade and spend his or her currency may find a mobile wallet most useful. 

  1. Create your crypto wallet.

For hot (online) wallets, registration is simple and will usually only require an email address. When opening an account, be sure to use a secure password and. For cold (offline) wallets, one may purchase the hardware directly from a retailer. 

  1. Receive cryptocurrency.

When making a transaction, give the sender your public address. The recipient must only wait for the transaction to be confirmed by the network. The wallet does the rest and automatically receives the cryptocurrency.


Are you looking to buy bitcoin and hold it as an investment? How about using ether to purchase goods and services? Regardless of your purpose, the first step in crypto ownership is creating a wallet. This is a simple process for any user following the above steps.

About CrossTower

Founded in 2019, CrossTower is an exchange operator founded by capital markets veterans on a mission to mainstream digital asset trading and investing. Our digital-asset platform was methodically built for institutional and individual investors with best-in-class safeguards, services and capabilities as well as innovative pricing to make the next-generation financial markets a reality. Because our leadership team has extensive experience building and managing traditional exchanges, we understand what’s needed to ensure the CrossTower experience is familiar to market professionals.

CrossTower Inc. provides this content for general information purposes, to better inform you on your digital asset investment journey. We do not provide investment recommendations or provide tax advice. Please consult your investment professional or tax advisor if you require assistance in these areas.