I'm trying to understand how these work. From what I understand so far the Trezor or KeepKey contain a "private key" that's used to sign a transaction.
I watched a couple of videos but most just show how the devices operate and don't give a high level view of what each actually does.
Can someone explain to me how this works in a few more words. Does the Trezor or KeepKey generate a wallet address for example. Also I understand if I lose either then I can restore if I know a set of words. But how does that actually work?
The word "wallet" means two things:
- 1. A file that holds your private keys and/or related information. In the case of a hardware wallet, it also includes software that creates addresses and signs transactions using the stored private keys.
- 2. Software that connects to the Bitcoin network and creates and publishes transactions, and monitors the addresses in your wallet.
Most wallets are a combination of #1 and #2. They access the Bitcoin network and manage your private keys and the bitcoins that they hold.
Hardware wallets, such as Trezor, Ledger, and KeepKey, are limited to #1, so they need software that does #2 in order for you to use them. Tezor and Ledger both have sites that you can use to spend the bitcoins in your hardware wallet.
Hardware wallets generate their own addresses using the list of words that you write down. If you enter the same list of words into two different wallets, they will generate the same addresses. That way if you lose your wallet, you can enter the same list of words into a new one so that it will use the same addresses as the old one.