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What Are NFT Wallets, and Why Do You Need One?

BY Eric James Beyer

July 14, 2022

Before you buy cryptocurrency or NFTs, you’ll need somewhere to store the digital assets you buy — i.e a crypto wallet. A crypto wallet is a physical device or computer program that allows you to store and manage digital assets.  When you create a crypto wallet, it automatically generates a series of words known as a “seed phrase” or “recovery phrase.” The wallet uses the seed to create private keys, which are essentially passwords that let you access and manage your assets.

Never share your seed phrase or private keys with anyone, or they’ll be able to access your digital assets. A crypto wallet is like a password manager for those assets. Your seed phrase is like the master password for your wallet. If you delete your crypto wallet, you can recreate it and access everything in it using your seed phrase. But if you lose or forget your seed phrase, you lose access to your wallet and all your assets — forever. 

There are two types of crypto wallets: software (hot) wallets and hardware (cold) wallets. 

A software wallet is an application that can be downloaded and installed on your desktop or mobile device. Popular wallets include MetaMask, WalletConnect, and Rainbow Wallet. Generally, they are easier to use than hardware wallets as the private keys are stored online, and the wallet is always connected to the internet. Many marketplaces require you to use a software wallet for transactions, but these wallets are more vulnerable to attacks and are easier to hack than hardware wallets.

A hardware wallet is a physical device similar to a USB drive, except it only stores crypto assets. Popular examples include Ledger and Trezor. To access the information held on this wallet, you need to physically plug it into your computer. Your digital assets will be stored on the device rather than inside online servers. As these wallets can be isolated from the network, assets stored in them are considered to be in “cold storage” and are far more securely stored than those in software wallets.

Even when hardware wallets are connected, the items stored on the drive are near impossible to steal. This is because transactions are completed with your private keys in-device and then broadcast to the network via the internet connection. Since your private keys never leave your device, malware can’t obtain the information needed to falsify a transaction.

Want to know everything about NFTs? See our comprehensive guide. Prefer having the key points explained in under 400 words? See the other articles in our NFTL;DR series:

NFTL;DR Marketplaces
NFTL;DR NFTs
NFTL;DR. NFTs vs. Crypto
NFTL;DR Buying NFTs
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