How Wallets and Seed Phrases Work

A Wallet is a place where you hold your crypto funds, technically it doesn't hold your funds but it holds the keys to those coins which are stored on the blockchain so you can access them. A wallet can be comprised of many accounts. Each account/address holds two keys. one is a private key. This is like a password. The other is a public key which is like an account number or unique username.

Seed phrases are secret recovery phrases represented in 12 consecutive words (similar to a password), each word corresponds to a word in the seed phrase list it acts as a key to unlock your wallet, your seed phrase represents private keys in a human readable format, how they actually work is a bit more complicated (article forthcoming). Seed phrases should be stored securely. A Seed phrase also has the ability to create many accounts/addresses in what is called a deterministic wallet, in this scenario a master key is generated which can deterministically create "child" accounts. Here you can create many accounts using one seed phrase and as long you have the seed phrase you will have access to these accounts.

There are two types of deterministic wallets, one is a hot wallet, these type of wallets are connected to the internet and examples include web based wallets, mobile wallets and desktop wallets. Here are some links to these types of wallets Rabby Wallet, Metamask, Exodus, and One Key These types of wallets tend to be free to download and use and provide other types of functionality. The other type of wallet is a cold wallet, these include products like Ledger and Trezor; these wallets are physical or considered "hardware wallets". Cold wallets are not connected to the internet and your private keys are generated and stored "offline" and have a less of a risk of being "hacked"

Most wallet software will have the option to either recover an existing wallet (by importing an existing seed phrase or private key) or creating a new one. You can import your seed phrase into as many wallets as you like and have the ability to access them all, again the wallet just holds the public and private keys it doesn't actually hold the funds.

Restoring, Creating and Transferring Funds

Restoring a wallet is essentially taking your seed phrase and importing it into a new wallet, it can be a hot or cold/hardware wallet. Once you restore a wallet, you will have access to the specific blockchain and you can transfer your funds. Hot wallets while being less secure allow you to connect to decentralized apps like this to utilize your funds in different ways.

Creating a new a wallet is very simple, most wallets will generate a seed phrase for you and you just need to store this securely.

Most wallets allow to transfer funds with a simple user interface, hot wallets like previously stated allow you to connect and use your wallet like a debit/credit card.