Wallets

A bitcoin wallet is software or a device that holds the keys to your coins, but it does not hold the coins themselves. Coins sit on the blockchain, locked to addresses. Your wallet keeps the private keys that can unlock them, shows you addresses to receive to, and builds the transactions that move coins when you send.

What does a wallet do?

A wallet has three main jobs. It creates and stores your private keys. It gives you addresses to receive coins at. And it builds and signs a transaction when you want to send coins somewhere else.

Most wallets hide these details, so you see only a balance and an address while the keys stay in the background. Before you trust a wallet with real money, make sure you know where its keys live and how to back them up.

What kinds of wallets are there?

Wallets differ in two main ways. The first is whether the wallet stays connected to the internet. A hot wallet does, while a cold wallet keeps its keys offline. The second is custody, which is covered below.

Mobile wallets

A mobile wallet runs on your phone. It is quick and always with you, which makes it suitable for small amounts used in everyday payments. The phone is connected to the internet, though, and it can be lost, stolen or infected with malware. Keep only small amounts on it.

Desktop wallets

A desktop wallet runs on a computer. It usually offers more options than a phone app, and it gives you more control over its settings. The main risk is the computer itself. Malware that can read your files can also read a wallet file, or a seed phrase saved on the machine. Keep your seed phrase off the computer.

Hardware wallets

A hardware wallet is a small device that keeps your keys. It signs transactions on the device itself, so the keys never reach your computer. Your computer sends it the transaction, and the device returns only the signed version. Hardware wallets cost money and add a step, but they are the usual choice for larger savings.

Paper wallets

A paper wallet is a printout of keys or addresses, made while offline. Few people use one today. Generating and printing keys is easy to get wrong, and a copy left in a printer or a photo can leak them. A seed phrase written on paper is a safer use of paper, because most modern wallets can restore everything from it.

What is custody?

Custody means who holds the keys. With a custodial wallet, a company holds the keys for you. You log in, see a balance, and the company decides when and where you can send. With self-custody, you hold the keys yourself. You control the coins, and you carry the responsibility for keeping them safe.

As a quick check, if an app never gives you a seed phrase or a way to export your keys, it is probably custodial. The exchanges page explains the risks of leaving coins with a company.

What is a seed phrase?

A seed phrase is a list of 12 or 24 words that your wallet creates when you set it up. The words encode a random number. The wallet turns that number into a seed, and the seed produces every private key and address the wallet uses. The standard is BIP 39.

Writing down the seed phrase is your backup. If you lose the device, a compatible wallet can restore every key from those words. The same words also let anyone take your coins, so keep them private.

A 12-word phrase holds 128 bits of randomness, and a 24-word phrase holds 256 bits. Both are far too large to guess, so a 12-word phrase is fine. It is also easier to write down and remember.

How do you set up a wallet?

1. Get the wallet from its developer's website. Type the address yourself or use a bookmark, and check the spelling each time.
2. Install it and choose to create a new wallet. Restore from a seed only if you already have one.
3. Write the seed phrase on paper, in order, when the wallet shows it. Do not photograph it or type it into a computer.
4. Confirm the words if the wallet asks you to.
5. Before you store a large amount, check that the seed restores the wallet on a second device.

Bitcoin Core is another option. It is a full node, and it can also act as a wallet. It checks every payment itself, so you do not have to trust anyone else's node. The cost is time and disk space, because it downloads the whole blockchain, which takes hundreds of gigabytes.

What should you look for in a wallet?

• It shows you a seed phrase when you create it, so you hold the keys.
• Its code is open source, so people can review it for mistakes.
• You download it from the developer's own website, and it receives regular updates.
• You can restore it from a standard seed phrase on another device.
• It works with a hardware wallet, in case you want to upgrade later.
• It shows its fee choices clearly. The fee rate page explains them.

Who should you never give your seed phrase to?

Nobody. Do not type or paste your seed phrase into a website, an app, a chat or a form. Support staff never need it. Anyone who asks for it, including someone who says they are from support, is trying to take your coins.

What next?

Once your wallet is set up, you are ready to get coins and send them. Exchanges explains buying from a company and the risks of keeping coins there. Sending covers addresses, fees and confirmations. Security explains how to protect the keys.