Wallet (Bitcoin wallet)

Despite the name, a Bitcoin wallet holds no money. Your bitcoin exists as entries on the blockchainGlossaryBlockchainBitcoin’s public ledger: a chain of blocks in which each block refers to its predecessor. Anyone wanting to change an old entry would have to recreate all the blocks that follow it.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →×. The wallet manages your private keysGlossaryPrivate keyA secret, randomly generated number that you use to sign transactions and so control your bitcoin. Anyone who knows the private key can spend the bitcoin that belongs to it – it must never fall into anyone else’s hands.On the learning path: Stage 5 · Step 3 – Backing up your seed phrase →In the glossary →× – and with them, control over that bitcoin.

What a wallet does

Bitcoin’s developer documentation names three tasks: providing public keys or addresses, signing transactions and broadcasting them to the network.^[1] The wallet reads your balance from the blockchain. The tasks can be split: a hardware walletGlossaryHardware walletA small dedicated device that keeps your private keys offline and signs transactions internally. The key never leaves the device, so malware on your computer can’t get at it.On the learning path: Stage 6 · Step 1 – Hardware wallets compared →In the glossary →× signs, an app does the rest.

What types there are

• Custody: the keys are with you (self-custodyGlossarySelf-custodyYou hold the private keys to your bitcoin yourself – in your own wallet rather than with a provider. Nobody can freeze your bitcoin. But nobody can help you if you lose your seed phrase and keys.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →×) or with a provider (custodianGlossaryCustodian (custodial)A provider such as an exchange or app that holds the private keys for you. Convenient, because support can help if you lose your password – but you don’t hold the bitcoin yourself and depend on the provider paying out.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →×).
• Form: an app on a smartphone or computer (software walletGlossarySoftware walletA wallet in the form of an app on a smartphone or computer. It stores your keys on a device with internet access – convenient and usually without a purchase price, but more vulnerable than a hardware wallet. Good for smaller amounts and for practising.On the learning path: Stage 5 · Step 2 – Setting up your first wallet →In the glossary →×) or a dedicated device.
• Connection: online (hot walletGlossaryHot walletA wallet whose private keys are stored on a device connected to the internet – such as a smartphone app. Handy for payments and small amounts, but more exposed to online attacks than cold storage.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →×) or offline (cold storageGlossaryCold storageStoring bitcoin in a way that keeps the private keys from ever touching the internet – for example on a hardware wallet or an offline device. It protects against online attacks, but requires a carefully kept backup.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →×).

The differences in detail: Types of wallet.

The key matters, not the app

The whitepaper already defines an electronic coin as a chain of digital signatures: whoever passes on bitcoin signs with their key.^[2] Anyone who knows the key – or the seed phraseGlossarySeed phrase (recovery phrase)A sequence of usually 12 or 24 words from which your wallet derives all its private keys. Anyone who knows the words has full access to your bitcoin – so they belong in an offline backup and never in anyone else’s hands.On the learning path: Stage 5 · Step 3 – Backing up your seed phrase →In the glossary →× it is derived from – can spend the bitcoin. If you lose your phone, you restore your bitcoin in another compatible wallet using your safely stored seed phrase. If strangers know your words, no app can protect you.