You may want to update the grammar in the sentence describing the shutdown of Silk Road. It was not shut down "for allowing users to buy and sell narcotics and other illicit goods using Bitcoins". It was shut down "for allowing users to buy and sell narcotics", period.
The fact that they accepted Bitcoin as a payment method, although relevant to this article, has nothing to do with the reason why they were shut down. They would have been shutdown just the same had they not been accepting Bitcoin as payment.
The relationship between the blockchain and your wallet is not easy to describe. On the one hand, as you say, your bitcoins exist in the blockchain - your wallet is really just a convenient way to store your credentials (including your private key) to allow access. On the other hand, the credentials stored in the wallet are the only possible form of access. If you lose your wallet (more specifically, the credentials stored within) then you lose access to your bitcoins. And if someone steals your wallet, they can (and probably will) steal your bitcoins. So it does make a certain practical (if not technical) sense to think about your wallet actually containing the bitcoins.
Authored Comments
You may want to update the grammar in the sentence describing the shutdown of Silk Road. It was not shut down "for allowing users to buy and sell narcotics and other illicit goods using Bitcoins". It was shut down "for allowing users to buy and sell narcotics", period.
The fact that they accepted Bitcoin as a payment method, although relevant to this article, has nothing to do with the reason why they were shut down. They would have been shutdown just the same had they not been accepting Bitcoin as payment.
The relationship between the blockchain and your wallet is not easy to describe. On the one hand, as you say, your bitcoins exist in the blockchain - your wallet is really just a convenient way to store your credentials (including your private key) to allow access. On the other hand, the credentials stored in the wallet are the only possible form of access. If you lose your wallet (more specifically, the credentials stored within) then you lose access to your bitcoins. And if someone steals your wallet, they can (and probably will) steal your bitcoins. So it does make a certain practical (if not technical) sense to think about your wallet actually containing the bitcoins.