🌱 Module 1: Wallet Basics

What is a Bitcoin Wallet?

Despite the name, a Bitcoin wallet doesn't actually store Bitcoin. Instead, it stores the cryptographic keys that prove your ownership of Bitcoin on the blockchain.

Think of it this way:

  • The blockchain is like a public ledger showing all Bitcoin balances
  • Your private key is like a password that proves ownership
  • Your public key/address is like an account number where others can send you Bitcoin
  • Your wallet is the app that manages these keys and helps you transact

Key Insight

"Not your keys, not your coins." This famous Bitcoin saying means that whoever controls the private keys controls the Bitcoin. That's why understanding wallets and key custody is crucial.

Custodial vs Non-Custodial Wallets

The most important distinction in Bitcoin wallets is who controls the private keys.

🏦 Custodial Wallets

A third party (like an exchange) holds your private keys for you.

Pros:
  • Easy to use
  • Can recover account if you forget password
  • Often insured
Cons:
  • You don't truly own the Bitcoin
  • Risk of exchange being hacked
  • Account can be frozen
  • Privacy concerns

Examples: Coinbase, Binance, Cash App

Non-Custodial Wallets

You control your private keys. Only you can access your Bitcoin.

Pros:
  • True ownership
  • No counterparty risk
  • Better privacy
  • Cannot be frozen
Cons:
  • You're fully responsible for security
  • If you lose keys, Bitcoin is gone forever
  • Slightly more technical

Examples: BlueWallet, Electrum, Muun

⚠️ Important

For your first Bitcoin experience, a custodial wallet (like Cash App or Coinbase) is fine for learning. But as you accumulate more, move to a non-custodial wallet to truly own your money.

Rule of thumb: Custodial for amounts you'd carry in cash. Non-custodial for everything else.

Hot Wallets vs Cold Wallets

Another important distinction is whether your wallet is connected to the internet:

🔥 Hot Wallets

Wallets connected to the internet (mobile apps, desktop apps, web wallets).

  • Pros: Convenient for daily use, instant transactions
  • Cons: Vulnerable to online attacks, malware
  • Best for: Small amounts for spending

❄️ Cold Wallets

Wallets kept offline (hardware wallets, paper wallets).

  • Pros: Very secure, immune to online attacks
  • Cons: Less convenient for daily use, costs money (hardware wallets)
  • Best for: Long-term savings, large amounts

Recommended approach: Use a hot wallet for daily spending and a cold wallet for long-term savings—like keeping cash in your physical wallet but savings in a bank vault.

Choosing Your First Wallet

For beginners, we recommend starting with a simple mobile wallet. Here are some excellent options:

Beginner-Friendly Wallets

BlueWallet (Recommended for beginners)

iOS, Android

  • Non-custodial
  • Clean, intuitive interface
  • Supports Lightning Network
  • Open source

Muun

iOS, Android

  • Non-custodial
  • Great for beginners
  • Seamless Lightning integration
  • Excellent recovery options

Cash App

iOS, Android (US only)

  • Custodial (but can withdraw)
  • Extremely easy to use
  • Instant buy/sell
  • Good for absolute beginners

Interactive: Wallet Security Workshop

Practice creating wallets with truly random seed phrases, generate addresses, and learn how different seeds create different addresses. Hands-on wallet security experience!

Launch Wallet Security Workshop →

Try generating different seeds and see how addresses change! This is a safe simulation.

Understanding Seed Phrases (Recovery Phrases)

When you set up a non-custodial wallet, you'll receive a seed phrase (also called a recovery phrase or backup phrase). This is typically 12 or 24 words.

abandon ability able about above absent absorb abstract absurd abuse access accident

Example 12-word seed phrase (DO NOT USE THIS)

What is a seed phrase?

  • It's a human-readable representation of your private keys
  • Anyone with your seed phrase can access your Bitcoin
  • If you lose it, your Bitcoin is gone forever
  • It's the ONLY way to recover your wallet

Seed Phrase Security Rules

  • Never enter it on any website
  • Never take a photo of it
  • Never store it digitally (no cloud, no email)
  • Write it down on paper and store in a secure location
  • Consider metal backup for fire/water protection
  • Never share it with anyone—not even "support"

Interactive: Security Dojo

Train your Bitcoin security skills! Learn wallet protection, backup strategies, and practice with testnet multi-sig. Earn your security belt!

Launch Security Dojo →

Complete the security assessment and hands-on testnet multi-sig workshop!

Key Takeaways

  • A wallet stores your keys, not your Bitcoin (Bitcoin lives on the blockchain)
  • Custodial = someone else holds your keys (easier, less control)
  • Non-custodial = you hold your keys (more control, more responsibility)
  • Hot wallets are convenient but less secure (for spending)
  • Cold wallets are very secure but less convenient (for savings)
  • Seed phrase is the master backup—protect it with your life
  • Start with a simple mobile wallet like BlueWallet or Muun
  • "Not your keys, not your coins"—this is fundamental