A crypto wallet does not actually "store" coins the way a physical wallet stores cash. Instead, it stores the private keys that prove ownership of assets recorded on a blockchain, and lets you sign transactions with them.
Hot wallets are connected to the internet — browser extensions, mobile apps, and exchange accounts all fall into this category. They are convenient for frequent trading and everyday use, but that same internet connectivity is what exposes them to phishing sites, malware, and compromised devices.
Cold storage keeps private keys completely offline, most commonly on a dedicated hardware wallet or an air-gapped device. Transactions are typically signed on the offline device and only the signed result ever touches an internet-connected computer, which dramatically reduces the attack surface for remote theft.
Most experienced holders use a mix of both: a hot wallet with a small amount for daily spending or active trading, and cold storage for the bulk of long-term holdings.
Regardless of which wallet type you use, the seed phrase — the human-readable backup of your private keys — is the single most sensitive piece of information in the entire setup. Anyone who has it can move your funds; there is no support line to call to reverse a transaction once it's signed.
