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Wallet | Bitcoin Glossary | Mapping Bitcoin

Wallet

General

Also known as: Bitcoin wallet

Software or hardware that manages Bitcoin private keys, generates addresses, creates and signs transactions, and tracks balances. Wallets range from simple mobile apps to complex multi-signature setups and do not actually 'store' bitcoin, which exists only on the blockchain.

Overview

A Bitcoin wallet is a tool that manages the cryptographic keys needed to send and receive bitcoin. Despite the name, wallets do not actually "store" bitcoin — all bitcoin exists as UTXOs on the blockchain. What a wallet stores are the private keys that prove ownership and authorize spending. Wallets also generate addresses, construct and sign transactions, and display balances by scanning the blockchain for relevant UTXOs.

Types of Wallets

                     Security ──────────────────> Higher
                     Convenience ──────────────> Lower

┌──────────┬──────────────┬───────────────┬──────────────┐
│  Mobile  │   Desktop    │   Hardware    │  Air-gapped  │
│  Wallet  │   Wallet     │   Wallet      │  Cold Storage│
│          │              │               │              │
│ Keys on  │ Keys on      │ Keys on       │ Keys on      │
│ phone    │ computer     │ dedicated     │ offline      │
│          │              │ device        │ device       │
│ Hot      │ Hot/Warm     │ Cold          │ Cold         │
└──────────┴──────────────┴───────────────┴──────────────┘
  • Hot wallets: Connected to the internet for convenience, suitable for everyday spending.
  • Hardware wallets: Dedicated devices that sign transactions without exposing keys to an internet-connected computer.
  • Cold storage: Keys stored completely offline, ideal for long-term savings.
  • Multisig: Requires multiple keys to authorize a transaction, distributing trust across devices or parties.
  • Watch-only: Can monitor balances and generate addresses but cannot sign transactions.

Key Management

Modern wallets typically use HD wallet standards (BIP32/BIP39/BIP44), generating all keys from a single seed phrase (usually 12 or 24 words). This seed phrase is the master backup — losing it means losing access to all derived keys and the associated bitcoin.

Core Functions

  1. Key generation: Creating new private/public key pairs
  2. Address derivation: Generating receive addresses from public keys
  3. UTXO tracking: Scanning the blockchain to find owned UTXOs
  4. Transaction construction: Selecting inputs, defining outputs, calculating fees
  5. Signing: Using private keys to authorize spending
  6. Broadcasting: Sending signed transactions to the Bitcoin network

Common Misconceptions

  • Wallets do not "hold" bitcoin. They hold keys. If you import a seed phrase into a different wallet application, you gain access to the same bitcoin because the keys are the same.
  • A wallet backup is a backup of the keys (seed phrase), not a backup of the bitcoin. The bitcoin remains on the blockchain regardless of what happens to the wallet software.

Términos Relacionados

HD WalletSeguridad

A hierarchical deterministic wallet that generates all key pairs from a single master seed using the BIP32 standard. HD wallets simplify backup (only the seed needs to be stored) and enable organized key management with multiple accounts and address chains.

Hardware WalletSeguridad

A dedicated physical device that stores Bitcoin private keys in a secure element and signs transactions offline, protecting keys from exposure to internet-connected computers. Popular hardware wallets include Trezor, Ledger, and ColdCard.

Hot WalletSeguridad

A Bitcoin wallet connected to the internet, offering convenience for frequent transactions but with greater exposure to potential hacks and malware. Hot wallets are suitable for smaller amounts used in day-to-day spending.

Cold StorageSeguridad

A method of storing Bitcoin private keys on a device or medium that is not connected to the internet, providing protection against remote hacking and malware. Examples include hardware wallets, paper wallets, and air-gapped computers.