What does a Bitcoin wallet do?
Correct answer
Answer B: It manages the keys and information you need to receive and send bitcoin.
Quick explanation
Bitcoin are not held inside a wallet like coins in a purse. The wallet manages the keys that let you control and use bitcoin on the network.
Detailed explanation
Bitcoin are not stored as files in a wallet. They appear in the blockchain as unspent transaction outputs, or UTXOs. A wallet identifies which outputs its keys can control and calculates a displayed balance from them. When sending, it selects suitable UTXOs, creates new outputs and arranges the required signatures.
These tasks need not all happen on the same device. An online program can display addresses, monitor the balance and create an unsigned transaction. A separate device can do only the signing. A watch-only wallet knows public information and can observe payments but has no private keys for spending. A complete blockchain is not required for every wallet either; some query their own or third-party servers. What matters is therefore not just the app's name, but which keys it controls, how it verifies the network and who can sign transactions.
Key takeaway
Wallets manage keys and transactions, not bitcoin files.
Common misconception
Many beginners apply the image of a physical wallet or computer folder to Bitcoin. This creates the false impression that the bitcoin themselves are on the device. The explanation instead focuses on UTXOs and key control.
Sources used
Bitcoin Developer Guide - Wallets
This source is mainly intended for developers. The relevant information may therefore be harder to find.
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