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Wallets hold Private Keys, Not Bitcoin

Updated: Apr 17, 2023

The most common misconception of Bitcoin is that it's a digital file that moves around from one wallet to another, the same way a Dollar Bill in your pocket changes hands. In reality, Bitcoin never leaves the blockchain, and its movement is actually controlled by Private Keys. These keys are what a wallet generates and protects. They are what authorize the movement of Bitcoin on the blockchain from one address to another.

The Bitcoin blockchain is a global distributed ledger maintained by a network of validators and mining nodes. Nodes are responsible for approving transactions and updating the UTXO balance an address holds on the ledger. So when you move Bitcoin from your address to another, you're actually updating the ledger that maintains an address UTXO balance, debiting one address and crediting another. You're using the private key on your wallet to sign/approve a transaction, which essentially authorizes the nodes to update the blockchain balance of your address. That is why it is so important to keep the private keys on a non-network connected device, that way the device that holds your keys can never be remotely hacked and your keys cannot get snatched.

If someone has control of your private key they can authorize the transfer of Bitcoin from the address that key controls to any address on the blockchain. There is no recourse. So while the freedom offered by Bitcoin is staggering, the security of safeguarding your keys now falls squarely on the user's shoulders. That's why choosing a hardware wallet with the best security is paramount, and having the option to utilize Air Gap is a mandatory feature. Having a camera on the hardware wallet makes this very convenient.


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