A Bitcoin wallet is a bit misnamed. Your coins never leave the blockchain. What the wallet actually stores is your private key — the secret that lets you spend them.
Keys and addresses
From a private key, the wallet derives a public key, and from that, an address you can share to receive payments. Sending bitcoin means creating a transaction and signing it with a digital signature that proves you hold the key — without revealing it.
The seed phrase
Modern wallets generate all keys from a single seed phrase of 12 or 24 words. Write it down on paper or metal and keep it safe: anyone with those words can take your bitcoin, and if you lose them (and the device), your coins are gone forever.
Types of wallets
Hot wallets are apps on a phone or computer. Convenient, but online.
Hardware wallets keep keys on a small dedicated device that signs transactions offline. Good for larger amounts.
Multisig setups require several keys (e.g. 2 of 3) to spend, removing single points of failure.
Custodial vs. self-custody
If you keep bitcoin on an exchange, the exchange holds the keys and you hold an IOU. The saying "not your keys, not your coins" comes from exchange collapses like Mt. Gox (2014) and FTX (2022). Self-custody means holding your own keys — more freedom, more responsibility.