Bitcoin Wallets: Custody Models, Storage Types, and Key Security
Summary
The guide explains that a Bitcoin wallet manages the keys used to authorize transactions rather than holding coins themselves. It contrasts custodial wallets, where a service controls the keys, with non-custodial wallets, where users manage private keys and recovery phrases. It also compares online software wallets with offline hardware storage, emphasizing the tradeoff between convenient access and exposure to online threats. Using separate storage for long-term holdings and everyday spending is offered as a practical approach.
Security guidance focuses on protecting recovery phrases offline, avoiding phishing, using strong account protections, and keeping wallet software current. The document also explains that a seed phrase can restore access on a replacement device and that HD wallets can derive multiple addresses from one phrase. These are general educational guidelines, not a review of particular wallet products or a guarantee of safety. Risks such as device compromise, theft, and loss of the recovery phrase remain, and the guide does not cover transaction fees or detailed backup procedures.
Key ideas
- A Bitcoin wallet manages private keys that authorize transactions; the coins remain recorded on the blockchain.
- Custodial wallets place key control with a service, while non-custodial wallets leave it with the user.
- Hardware wallets keep keys offline, while connected software wallets are more convenient for frequent use.
- A recovery phrase can restore a non-custodial wallet, so it needs secure offline protection.
- Using different storage for long-term holdings and routine spending can balance security with convenience.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.