Keys and wallets
Who owns what, and what a recovery phrase really is.
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Step 1 of 5
Your wallet makes a secret key
A self-custody wallet creates a secret number called a private key. Only that key can approve, or sign, a payment from your address.
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Step 1 of 5
Your wallet makes a secret key
A self-custody wallet creates a secret number called a private key. Only that key can approve, or sign, a payment from your address.
Step 2 of 5
The address comes from the key
From the key, the wallet works out an address. You can share the address freely. It cannot be turned back into the key.
Step 3 of 5
Coins are recorded, not stored
Your coins are not inside the wallet. The blockchain records which address owns them, and the wallet holds the key that can move them.
Step 4 of 5
The recovery phrase backs up the key
Wallets often show a recovery phrase of 12 to 24 words, taken from a fixed list of 2,048. Anyone with those words can rebuild the key. Try it below.
Try it
Safe. People can send you coins and see the address's history, but nobody can move your coins.
Step 5 of 5
What can go wrong
If you lose both the wallet and its recovery phrase, nobody can recover the coins. Share the phrase and they can be taken. Wallet makers such as Ledger say they will never ask for it; scammers posing as support staff do. On an exchange, the exchange holds the keys for you, which brings different risks (lesson 6).
The address shown is a made-up example.
Quick check
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2 questions. Get them right to complete the lesson.
Or skip ahead to lesson 3: Sending a payment.
Sources
Checked 4 October 2026- Ethereum accountsethereum.org
- From the key, the wallet works out an address.
- The address cannot be turned back into the key.
- Bitcoin developer guide: transactionsBitcoin Project
- A self-custody wallet creates a secret number called a private key.
- Only that key can sign a payment from your address.
- The blockchain records which address owns the coins.
- Ethereum walletsethereum.org
- Your coins are not inside the wallet: the wallet is a window onto the blockchain and holds the keys.
- Wallets often show a recovery phrase to write down.
- The recovery phrase is the only way to recover a self-custody wallet.
- On an exchange, the exchange holds the keys for you.
- BIP-39: Mnemonic code for generating deterministic keysBitcoin Improvement Proposals
- A recovery phrase is 12 to 24 words, taken from a fixed list of 2,048.
- BIP-32: Hierarchical deterministic walletsBitcoin Improvement Proposals
- Anyone with those words can rebuild the key.
- Some things you need to knowbitcoin.org
- If you lose both the wallet and its recovery phrase, nobody can recover the coins.
- Ongoing phishing campaignsLedger
- Share the phrase and the coins can be taken: scammers use it to recreate the wallet.
- Wallet makers such as Ledger say they will never ask for your recovery phrase; scammers posing as support staff do.
- Protect your privacybitcoin.org
- Anyone can see the balance and history of an address you share.
Corrections to this lesson: none so far. Spotted something wrong? See how we check facts on the sources page.