A Keychain, Not a Bank Account
A Bitcoin wallet is software or a physical device that stores your private keys — the secret codes that let you send your Bitcoin. Despite the name, a wallet does not actually hold any coins. Your Bitcoin lives on the blockchain. The wallet simply holds the keys that prove the Bitcoin is yours.
Think of it like a keychain. The keys on your keychain do not contain your house — they give you access to it. A Bitcoin wallet works the same way. It holds the keys that give you access to your Bitcoin on the blockchain.
This distinction matters. If you lose your wallet (the app or device), your Bitcoin is not gone. It is still on the blockchain. As long as you have a backup of your keys, you can restore access from any compatible wallet. But if you lose your keys with no backup, your Bitcoin is gone forever. There is no company to call. No password reset. No customer support. This is the price of being your own bank — and the reason backups are so important.
How Wallets Work
Every Bitcoin wallet creates a pair of cryptographic keys when you set it up.
Your private key is a secret number that proves you own your Bitcoin. When you send Bitcoin, your wallet uses this key to create a digital signature — a mathematical proof that you authorized the transfer. Never share your private key with anyone. Whoever has it can spend your Bitcoin.
Your public key is derived from your private key using one-way mathematics. It is used to generate your Bitcoin address — the string of characters you share with others so they can send you Bitcoin. Think of your address like an email address: anyone can send to it, but only you can access what arrives. You can create as many addresses as you like, and using a fresh address for each transaction is good practice for privacy.
The math behind this system only works in one direction. Your public key can be calculated from your private key, but knowing your public key does not reveal your private key. This is what makes the system secure.
Most modern wallets also generate a seed phrase when you first set them up — a set of 12 or 24 ordinary English words. This phrase is a human-readable backup of all your private keys. From this single phrase, every key your wallet has ever created can be regenerated. If your phone breaks or your hardware wallet is lost, entering your seed phrase into a new wallet restores everything.
Write your seed phrase on paper or stamp it on metal. Store it somewhere safe and private. Never type it into a website, never store it in a photo, and never save it in a notes app. Anyone who has your seed phrase has your Bitcoin.
Types of Wallets
Bitcoin wallets come in several forms. Each balances convenience against security differently.
Mobile wallets are apps on your phone. They are the most convenient option for daily use — scanning QR codes, making quick payments, and checking your balance on the go. A mobile wallet is a good starting point for beginners with smaller amounts. The tradeoff is that your phone is connected to the internet, which makes it more vulnerable to hackers or malware than an offline option.
Hardware wallets are small physical devices designed to keep your private keys offline at all times. When you want to send Bitcoin, you connect the device, review the transaction on its built-in screen, and confirm with a physical button. Your keys never leave the device and never touch the internet. Hardware wallets are the gold standard for securing larger amounts. Popular options include devices from Trezor, Ledger, and Coldcard.
Desktop wallets are software installed on your computer. They offer more features than mobile wallets but share similar risks — your computer is connected to the internet and can be compromised by malware. Desktop wallets are a reasonable middle ground for users who want more control without buying hardware.
Paper wallets are your keys printed or written on paper. While fully offline, they are fragile, easy to damage, and awkward to spend from. Most Bitcoiners today prefer hardware wallets or well-secured seed phrase backups over paper wallets.
For most beginners, starting with a reputable mobile wallet and moving to a hardware wallet as your holdings grow is a practical approach. The key rule is simple: the more Bitcoin you hold, the more security you need.
What’s Next
Understanding wallets is the first step toward taking real control of your Bitcoin. The next step is learning why holding your own keys matters so much. Read our guide on self-custody to understand the principle behind “not your keys, not your coins.”
For a broader introduction to Bitcoin itself, start with What is Bitcoin?.