Revision · Wallets & Keys

Part 7 unpacks one slogan — “not your keys, not your coins.” A wallet stores keys, not coins; the coins live on the ledger as UTXOs, and the keys are the only authority that can move them. The throughline is that ownership is a mathematical fact anyone can check, which puts the entire burden of guarding that authority on you.

What this part covered

• Keys and signatures — a private key is just a huge random number; the public key derives one-way via point multiplication on secp256k1, and a signature proves control of the key without revealing it, giving every node authenticity and integrity for free.
• Randomness is the whole game — security comes from the size of the ~2²⁵⁶ haystack, so weak entropy or a reused ECDSA nonce (RFC 6979 fixes the latter) has repeatedly leaked keys, and Schnorr from Taproot adds clean signature aggregation.
• Addresses and encodings — an address encodes a spending condition, not the public key, and Base58Check / Bech32(m) bake in a checksum so a mistyped character is rejected rather than sending coins into an unspendable void.
• HD wallets (BIP32) — one seed deterministically grows an unlimited, reproducible key tree; the xpub/xprv split enables watch-only wallets, and hardened derivation closes the trapdoor where an xpub plus one child key reconstructs the parent secret.
• Seed phrases (BIP39) — entropy becomes 12–24 checksummed words then a seed via PBKDF2; the words (not the device) are the real backup, and the optional passphrase adds a factor and deniability but has no recovery.
• Derivation paths (BIP44/49/84/86) — the standardized m / purpose' / coin' / account' / change / index map lets any wallet rederive the same addresses, so a “zero balance” after restore usually means the wrong purpose', not lost coins.
• Multisig and descriptors — k-of-n keys (2-of-3 kills both the “key stolen” and “key lost” failure modes) require an output descriptor to be recoverable, and PSBT ferries an unsigned transaction between separate signing devices.
• Key security — match storage to your threat model: hot vs cold, hardware wallets that sign internally and verify on their own screen, and redundant tested backups, because there is no recovery desk and roughly a fifth of all mined BTC is believed permanently lost.

The takeaway

Every layer serves one goal: let a single human safely hold the root of spending authority — provable by math, custodied by no institution — while keeping that secret both unreachable by attackers and un-loseable by you. The ledger enforces whoever proves key ownership and never reverses a valid signature, which is exactly what makes it trustless for strangers and why key discipline is the price of self-custody.