Continuing with the debit card analogy from above, a Bitcoin wallet holds at least one “account,” or sub-wallet. We can view this sub-wallet as being roughly equivalent to a debit card. For instance, debit cards have information associated with them, including an account number and a password. Each Bitcoin “account” within a Bitcoin wallet also has information associated with it. For our purposes, the two key pieces of information are the public bitcoin address and the private key. The public address is comparable to the debit card’s account number. The private key, meanwhile, is kind of like a debit card’s password in that it grants access to the bitcoin associated with that public bitcoin address. A private key is a 256-bit secret number. Here is an example:
108165236279178312660610114131826512483935470542850824183737259708197206310322
As you can see, this secret number is a bit unwieldy. One of the key functions of a Bitcoin wallet is to manage the private key. In fact, private keys are almost never handled directly by users. Bitcoin wallets provide a way to write down this private key in a much more human readable format, referred to as a recovery phrase, secret passphrase, or seed phrase. A recovery phrase is a list of words, usually between 12 and 24, that allow you to reconstruct your Bitcoin wallet and gain access to your funds even if your Bitcoin wallet is destroyed. Here is an example of a recovery phrase consisting of 12 words. Because the recovery phrase is equivalent to a private key, you should never share the words with anyone, or store the plain text on your computer or online.
While the recovery phrase is an improvement upon the private key, it still leaves a lot to be desired. Since you shouldn't store your recovery phrase in plain text (unencrypted form) on your computer, for most people the best solution is to write it down on paper. This presents problems because safely storing a piece of paper can be hard. Further, if you're using a multi-coin wallet (like the Bitcoin.com Wallet), you'll have a separate recovery phrase for every different blockchain your wallet supports. Storing all those recovery phrases on paper quickly becomes onerous. For this reason, the Bitcoin.com Wallet integrates a “Cloud Backup” system. Here you can create a single custom password and use it to unlock all of your private keys, which are stored in encrypted form in your Google or iCloud account.
There are two main types of wallets: hardware wallets and software wallets.
There are many software wallet choices, which can make choosing overwhelming. We welcome you to try the Bitcoin.com Wallet, which is an easy-to-use but powerful crypto wallet trusted by millions.
