🔑 Wallets & Keys
Keys, Addresses & Wallets
What a wallet actually holds and how signing works.
6 min read
The wallet holds keys, not coins
It's tempting to picture a wallet as a purse full of coins. It isn't. Your coins are entries on the blockchain. A wallet stores the private keys that prove you're allowed to move those entries.
A private key is a large secret number. From it, math derives a public key, and from that, your address - the string others send funds to. The derivation only runs one way: address from key, never key from address.
Signing a transaction
To send funds, your wallet uses the private key to produce a digital signature over the transaction. Anyone on the network can verify that signature with your public key, confirming you authorized it - without ever seeing the private key itself.
This is why 'not your keys, not your coins' is the mantra: whoever controls the private key controls the funds, full stop.
If someone else learns your private key or seed phrase, they can sign transactions as you. There is no password reset.
Seed phrases
Modern wallets show you a seed phrase - 12 to 24 ordinary words - when you set them up. Those words encode the master secret that regenerates every key in the wallet.
Write it down offline and store it safely. Anyone who reads it can recreate your wallet on any device; anyone who loses it can lose access forever.
Check your understanding
3 questions from this lesson, with the correct answer already marked.
1. What does a crypto wallet actually store?
- The coins themselves
- Your private keys
- A bank account number
- The whole blockchain
Coins live on-chain. The wallet holds the private keys that authorize moving them.
2. How does the network confirm you authorized a transaction?
- You enter a password stored on a server
- Your signature is verified with your public key
- A bank approves it
- Your seed phrase is broadcast
You sign with the private key; anyone can verify with the matching public key, without seeing the secret.
3. Someone gets your 12-word seed phrase. What can they do?
- Nothing without your password
- Recreate your wallet and move your funds
- Only view your balance
- Only receive funds
The seed phrase regenerates all your keys. Whoever holds it controls the wallet - guard it like cash.