101 · Foundations · lesson 2 of 4
What Bitcoin keys are, and how they work
This is the ground floor. What a “key” actually is, why 12 or 24 ordinary words can be that key, how that key becomes an address you can hand out safely, what a “wallet” really means once you know that — and how signing proves you hold the key without ever showing it. Everything else on this site sits on top of this page.
1 · Your Bitcoin is really a key
Your coins don’t sit inside your phone or your hardware wallet the way cash sits in a leather one — nothing is stored on the gadget itself. Every bitcoin lives on a shared public ledger — the blockchain — that everyone in the world can see. What makes a coin yours is that you, and only you, hold the secret key that can move it. Hold the key, hold the coins. Lose the key, lose the coins. There’s no bank to call to reset it, because there’s no bank — there’s just the key.
Try it here — the same demo that lives on its own page
Generate one random key — then watch how hopeless it is to guess it.
Runs entirely in your browser · nothing is sent, saved, or logged.
Now suppose you had real computing power, running non-stop since the Big Bang. How much of the keyspace would you cover?
And here's that number next to things we usually call "countless":
Bars are on a logarithmic scale — each step right is 10× bigger. On a normal scale, the key bar would dwarf the others off the edge of the screen.
2 · The seed words are that key
A key is really just an enormous, utterly random number — hopeless to copy down by hand without a mistake. So your wallet turns it into something human: a list of 12 or 24 ordinary words (the standard is called BIP-39 — the same enormous number, just translated into words). Those words are your key, in a form you can write on paper or stamp into metal. That’s why this whole guide is obsessed with backing them up safely: the seed words are the money. Anyone who reads them can take everything; anyone who loses them loses everything.
If the key is just a number, you might reasonably wonder why you cannot simply choose one — pick a memorable sentence, run it through some maths, and carry your wallet in your head with nothing to back up at all. You can. It is called a brain wallet, it needs no special software, and it has been emptied at scale for over a decade. The reason is the one honest thing about randomness: attackers generate keys from every phrase in every book, song, film and password leak ever published, and they do it continuously, in advance, for the whole world at once. A phrase you were pleased with has almost certainly been tried before you finished typing it. The number has to come from something that is not you — which is the entire subject of a later lesson, and the reason your wallet insists on generating it rather than asking.
See it work: watch a seed get created, one step at a time → — a throwaway seed, built in front of you from raw randomness to your first address.
3 · Private key → public key → address
Your key isn’t one thing — it’s the start of a short chain, and the chain only runs one way.
- Your private key is the secret: the only thing that can move coins. It never leaves your device.
- From it, your wallet computes a public key. Nothing downstream of the private key can spend — but “can’t spend” is not the same as “harmless to hand out.” More on that in a moment.
- From that, it computes an address — the string you give someone so they can pay you. Handing out an address is normal; that is what it’s for.
Each step is easy to compute forwards and, as far as anyone knows, impossible to run backwards. Nobody can look at your address and work out the public key; nobody can look at a public key and work out the private key. That isn’t a promise we’re making — it’s the arithmetic. It’s why the whole network can confirm your payment was authorised without ever seeing the secret that authorised it, and why nothing you hand out can be turned back into your key.
The easiest picture is a mailbox. The address is the slot in the front — anyone can drop something in. The private key is the only thing that opens the back and takes anything out.
And you don’t get just one. A single seed grows a whole tree of these chains, which is how your wallet can hand out a brand-new address every time you’re paid. That costs nothing and it is the normal way to use Bitcoin.
Now the promised moment on privacy. Nothing below the private key can take your coins — that part really is safe. But everything below it is public and permanent once it touches the chain, and whatever can be linked together eventually is. So the honest version isn’t “this is safe to share,” it’s: share an address when you need to be paid, share as little else as you can, and use a fresh address each time. The next section has the case that catches people out.
See it work: see the four address formats one key produces → — why addresses start with 1, 3, bc1q, or bc1p. Or watch one seed grow a whole tree of them →.
4 · So what is a “wallet”, then?
This is the word that causes the most trouble, because it gets used for at least three different things. Start with what a wallet is not: it is not the app on your phone, and it is not the little hardware device. Either of those can be replaced tomorrow without your Bitcoin moving an inch.
A wallet is the answer to two questions.
- Which coins are mine? That tree of addresses from the section above has a public half, called an extended public key — an xpub. Hand it to a piece of software and it can work out every address you will ever receive at, watch them, and add up your balance — without being able to spend a single satoshi (the smallest unit of Bitcoin).
- What does it take to move them? One key signing alone is single-signature. Fold a second secret of your own into that key and it’s a passphrase wallet. Spread the authority across several keys where a few must agree, and it’s multi-signature.
Both answers together are the wallet. Written out as a single line, that is called a wallet descriptor: it names the keys involved and the rule for spending, it contains no secrets, and it completely defines the wallet. You don’t need one today — but it is worth knowing the word, because for multisig it becomes as important as the seed words themselves. Choosing which of these arrangements fits you is exactly what the next level, 102 · Wallet configuration, is about.
Neither one can spend your coins — but they leak very different amounts. An address reveals one payment. An xpub reveals every address in that wallet, past and future, so anyone holding it can see your whole balance and history. Give out an address when you need to be paid; treat an xpub as private.
See it work: tap through a live 2-of-3 wallet → — three real keys, and watch any two approve a spend.
5 · Signing — proving it’s you without showing the key
So how do you spend without revealing your key? You sign. When you approve a payment, your device uses the private key to produce a one-of-a-kind signature for that exact transaction — like a wax seal that only your ring can stamp. Anyone can look at the signature and confirm it could only have come from your key, but no one can work backwards from it to the key itself.
That’s why a hardware wallet can sign a payment on a computer riddled with malware and still be safe: the key does its work inside the device and never comes out. You’re not sending your key anywhere — you’re sending proof.
That is also why these are called signing devices rather than storage. The device is not a USB stick with your coins on it — nothing is stored there at all. It is a sealed room your key works inside: a payment goes in, you approve it on the device’s own screen, and it comes back out signed, while the key itself never comes out. Lose the device and you buy another and restore from your words. Lose the words and nothing can help you.
See it work: sign a payment yourself → — then try to tamper with it and watch the signature break.
✓ Last verified: August 5, 2026