Foundational · v0
Wallets & Keys
A wallet doesn't hold coins — it holds the keys that prove they're yours. Lose the key, lose the funds. There is no reset.
TradFi →Safe-deposit box + a signature
Prerequisites
01 · Concept — what problem does it solve?
On a blockchain there are no accounts at a bank you can call. Ownership is proven by cryptography: every address has a , and only someone holding that key can authorize moving its funds. A "wallet" is just software that stores your keys and signs transactions with them. The coins never leave the chain — the wallet holds the authority over them. This is the radical part of crypto: . You are your own bank, with all the freedom and all the danger that implies.
02 · Mechanics
- Key pair: a private key (secret) and a public key derived from it. Your address is derived from the public key — share it freely to receive funds.
- Signing: to spend, your wallet signs the transaction with the private key. The network verifies the signature against the address — no key, no spend.
- : 12–24 words that encode your private key(s) in human-readable form. Anyone with the words has the funds. Write it down offline; never type it into a website.
- Hot vs. cold: hot wallets (MetaMask, phone apps) are online and convenient; cold wallets (Ledger, paper) keep keys offline for safety. Most people use both — small balances hot, savings cold.
- Custodial vs. self-custodial: an exchange wallet holds your keys for you (convenient, but "not your keys, not your coins"); a self-custodial wallet means only you can sign.
03 · Formulas
private_key → (one-way) → public_key → (hash) → address
// easy left-to-right, computationally impossible to reverse
sign(transaction, private_key) → signature
verify(transaction, signature, address) → true / false
04 · Edge cases & risks
- No undo, no recovery: lose the seed phrase and the funds are gone forever — there is no password reset and no support desk. Billions in BTC are permanently locked behind lost keys.
- Phishing & approvals: most "hacks" are users tricked into signing a malicious transaction or granting a token approval that drains them. The chain did exactly what the signature said.
- Seed-phrase theft: a photo of your words in cloud storage, or typing them into a fake site, is the single most common total loss.
- The UX problem: self-custody is hard, which is why account abstraction (social recovery, spending limits, sponsorship) exists — to keep the security without the foot-guns.
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