What’s in your Bitcoin wallet? Very little. I don’t mean very little value, but very little data. If you’re a Bitcoin billiionaire, your wallet still doesn’t contain very many bits.
You might reasonably expect that a crypto wallet is a container, given the analogy with an ordinary wallet, but it’s not much of a container. It’s more like a bank teller than a physical wallet. It’s primarily a piece of software that facilitates transactions.
It’s misleading to speak of a wallet as holding cryptocurrency. It holds private keys that allow you to access cryptocurrency, so in that sense it’s a password manager. Not only that, these days it’s effectively a password manager containing only one password.
When you back up a wallet, say the Exodus wallet, it asks you to store a seed phrase somewhere safe. Fine, but how do you back up your wallet, not just your seed phrase? How do you back up the data in your wallet? You don’t, because there isn’t any data in your wallet other than the seed phrase [1]. Everything is derived from your seed phrase, at least for the current style of wallet, technically known as a hierarchical deterministic (HD) wallet. The derivation algorithm is documented in BIP39.
The first crypto wallets held a set of private keys. But now wallets derive private keys from your seed phrase. So even though you may have used multiple private keys, the wallet doesn’t store multiple keys. It could store them, but it doesn’t need to. That’s why you can back up your wallet by only backing up your seed phrase.
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[1] A wallet may contain metadata, such as notes on transactions or software configuration preferences. This data isn’t recovered if you restore you wallet from just your seed phrase. But all your private keys can be regenerated. Think of the private keys as traditional metal house keys and the metadata as a sticky note on top of the keys. If you lose your keys and the note, you’d be happy to get the keys back.
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