How Do Crypto Wallets Make Money?

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More and more people are getting in on the cryptocurrency craze. What started as some underground buzz with the originator Bitcoin over a decade ago has now turned into a full-on investment strategy that continues to grow.

But how do crypto wallets make money? What do they do? Are they safe to use? This is the guide for you if you have been considering making the leap into cryptocurrency and needed answers to your questions.

How Do Crypto Wallets Make Money?

The wallet is basically the holding ground for your cryptocurrency. When it comes to the question of “how do crypto wallets make money,” the simple response is that the price of a cryptocurrency will change no matter where it is stored.

Even in cold storage, which means it is kept in an offline storage device, the valuation of those coins will change as the market does. The goal of anyone with a wallet is to accumulate coins that will grow in value over time.

Are Crypto Wallets Safe?

When you talk about cryptocurrency wallets, the one goal is to find transparency. You want to have a wallet transparent background, understanding what the security levels and ease of use are like.

In particular, you want to know whether or not the wallet that you choose is safe. No one wants to find out that their wallet has been compromised and all of their holdings have been stolen. It is a nightmare situation no matter who you are.

The wallet comes in two forms (which we will get into later). Both come with varying levels of security to them, but both are accessed using a “private key.” Think of this as the equivalent to a super-secure password. Without this key, the owner of the crypto wallet can’t access the money within.

The wallet will store the private key and allows the user to send and receive cryptocurrency of any kind. Just know that all of your coins are stored on the blockchain and that private key is necessary for things such as authorizing transfers.

Wallets are generally considered to be safe, with a big “but” attached. The cold wallet, which is kept offline on a separate drive, is considered to be the safer of the two. They are not subject to potential hacks as they are kept offline where outside users cannot reach them.

The other most common way of storing a wallet is through a coin exchange. The exchange itself makes it more convenient to send, receive, and trade coins effortlessly but there is the fact that they are always online. Exchanges can become subject to hacks from time to time, which leaves your currency susceptible to potential hacking.

How Crypto Wallets Work?

Let’s start with the blockchain. The blockchain is basically a public ledger. In this ledger, there are “blocks” that store any of the transactions within that blockchain. That includes balances held at that particular address, who holds the balances, and more.

When we talk about a crypto wallet, it isn’t stored in a wallet as you would traditionally think of one. Your coins exist on the blockchain while the wallet is a type of software that gives you the ability to interact with those balances that are being held on the blockchain.

The wallet will store the aforementioned addresses, allowing the owner of those addresses to move their coins while also letting others with access to the address see the balance held within. They are largely for users to receive, send, and store crypto in all its forms.

In order to receive funds, you need to be able to retrieve the address or public key. It is in the “generate address” feature that you would find in any wallet. Click in and copy either the QR code or alphanumeric address, sharing it with the person who will be sending you crypto.

In order to send funds, you need to do the inverse. Find the “send” feature, entering in the address of the wallet that you want to send coins to. Choose the amount and confirm, sending it to the person in question. Sending coins can require a fee that gets paid to the miners, this is in exchange for the processing portion of the transaction.

Crypto Wallet Types

There are two general types of wallet: the hardware and software wallets. The latter is a browser extension or desktop program that allows users to receive, send, and store their crypto. The former, however, are devices that can be plugged right into your computer.

Let’s take a look at the two and see what they offer and what makes them different from one another. It can help you to make the proper choice as to which wallet is the best for you.

Hardware Wallets

This is also known as “cold storage.” These are devices, typically a hard drive or flash drive, that stores your crypto offline. This means not being connected at all times like your wallet would be through something such as a cryptocurrency exchange.

It is even better because, if you have quite a bit of cryptocurrency in your account, you can keep your drives on you for safe keeping. Most of the hardware wallets will run you around $100 or so, though there are more expensive options out there.

It is also worth noting that a hardware wallet is a little more complicated to use than a software wallet. These are generally for high-value users or those who value the extra layer of security that the hardware wallets offer.

You can interact with these wallets through one of three ways: a company-created app, a separate software wallet, or a web-based interface.

Software wallets

This is a wallet, through a mobile app or computer program, that holds your private keys in online storage. These are unique to the different currencies out there. They can be used online for easier access, but there is a level of security that is lacking compared to the hardware wallets.

They can be used either as a web-based wallet, desktop wallet, or a mobile wallet. Each of them has its own case, all depending on what the goals of the user happen to be. They are more conveniently accessed by the user than the hardware wallet would be, which can help those who like to make real-time moves to make them in a timely fashion.

If there is one caveat about the software wallet it is security. Most of the exchanges that offer the software wallets are very secure, but they are not invincible. Hacks can happen and the last thing you want is for it to happen to your account.


There are two main methods for storing your cryptocurrencies. They both have their advantages and disadvantages, so it helps to know what each offers before making your choice.

Ultimately, wallets are pretty safe to use, especially when kept in cold storage. Proper management of your wallet allows you to trade, buy, and sell cryptocurrency and grow your portfolio accordingly.


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