Cryptocurrency doesn't sit in an account the way a bank balance does. It exists on the blockchain, and what you actually hold is a private key — a piece of cryptographic data that proves ownership and lets you authorize transactions. A "wallet" is the software or device that stores and manages that key on your behalf.

Custodial vs. non-custodial

• A custodial wallet — the kind you get by default on most exchanges — means the exchange holds the private keys for you. It's convenient and familiar (similar to a bank holding your money), but it also means you're trusting that company's security and solvency. The common phrase "not your keys, not your coins" is a blunt way of making this point.
• A non-custodial wallet means you hold your own private keys directly, typically via a seed phrase (a list of words that can regenerate your keys). This gives you full control, but also full responsibility — if the seed phrase is lost and there's no backup, the funds are generally unrecoverable. No customer support line can reset it.

Hot vs. cold storage

Wallets are also described as "hot" (connected to the internet — a phone or desktop app) or "cold" (offline — a hardware device or even a piece of paper with the keys written down). Hot wallets are more convenient for frequent use; cold storage is generally considered safer for holding larger amounts long-term, since it's not directly exposed to online attacks.

Exchanges: where buying and selling happens

An exchange is a platform for converting between cryptocurrencies and traditional currency, or between different cryptocurrencies. Centralized exchanges function similarly to a brokerage — you deposit funds, and the exchange facilitates trades using its own order book. Practical security habits worth knowing regardless of which exchange or wallet type you use: enable two-factor authentication, be skeptical of unsolicited investment opportunities, and never share a seed phrase or private key with anyone — no legitimate platform or support agent will ever need it.