1.3 Wallets & Private Keys

In Bitcoin, ownership is proven through cryptography, not by account balances at a bank. If you hold the private key, you control the bitcoin.

A Bitcoin wallet doesn't actually store coins. Instead, it stores your private keys — secret numbers that prove you have the right to spend bitcoin associated with specific addresses.

Your public address is derived from your public key, which is derived from your private key. You can share your public address freely to receive bitcoin, but your private key must be kept absolutely secret.

The phrase "Not your keys, not your coins" means that if you don't control the private keys, you don't truly own the bitcoin. Exchange accounts and custodial wallets control the keys for you.

Self-custody means holding your own private keys, typically using a hardware wallet or a software wallet where you write down a 12 or 24-word recovery phrase (seed phrase).