Let’s say you want to send cryptocurrency (like Bitcoin) to a friend. Here’s what happens:

1. You open your crypto wallet, enter your friend’s wallet address (a unique code), and send the amount.
2. This transaction is broadcast to the network of computers (nodes) to confirm that you actually have the funds to send.
3. Once confirmed, your transaction is grouped into a block and added to the blockchain.
4. Your friend receives the funds, and the transaction becomes a permanent part of the blockchain.

What is a wallet?

To use cryptocurrency, you need a wallet. A crypto wallet doesn’t actually store coins like a physical wallet holds cash. Instead, it holds a pair of keys—one public key (like an address where people can send you funds) and one private key (like a password that lets you access and send your funds).

Cold vs hot wallet?

Hot wallets: These are wallets connected to the internet, such as mobile, desktop or exchange wallets. While convenient for quick transactions, hot wallets are more vulnerable to hacking. If you're trading frequently, using a hot wallet is fine, but never store large amounts of cryptocurrency in it.

Cold wallets: Cold wallets are offline wallets, such as hardware wallets or paper wallets, and are the safest option for long-term storage. Because they are not connected to the internet, they are much less vulnerable to cyberattacks. A cold wallet is ideal for holding large sums of crypto that you don’t need immediate access to.