Wallets

What Is a Bitcoin Wallet?

By September 5, 2017 No Comments

A Bitcoin wallet is a piece of software that you use to communicate with the bitcoin network, and you can use it to tell the bitcoin network when you want to send and receive transactions.

The best way to understand the bitcoin wallet is by comparing it to email.  Once you’ve set up an email address, you need some kind of software to allow you to send emails from and receive emails to that address.

The best way to understand the bitcoin wallet is by comparing it to email.

Now this software may be an app on your phone, an app on your laptop, or an app online that you log into.

With email, you enter the username and the password for your email address into the app and that is how the internet knows that it is really you who wants to send email from and receive email to that address.

Of course you have to tell everybody you want to communicate with your email address – otherwise nobody can send you email.

But just because someone knows your email address, which allows them to send email to your address, that doesn’t allow them to send email from your address.

If they could, then that would be bad because then they could send emails disguised as you, and cause all kinds of problems.

If someone were to steal your email password, they could send malicious emails disguised as you.

In order to be allowed to send email from a particular email address, you have to know the password.

And if someone finds out your email password, then there’s nothing stopping them from logging into your email app and sending messages pretending to be you.

This is very similar to how bitcoin wallets work.  Every bitcoin account has 2 elements to it.  One of them is called your public address, which is kind of like your email address, and one of them is called your private key which is like your password.

Private key and public key have an opposite interlocking shape

Think of your private key as the only key in the world that interlocks perfectly with your public key.  You, and only you, can use it to link your personal identity to your public address – to prove that you are the legitimate owner of your public address, while no one else online needs to know anything about your identity to exchange bitcoins with you.

So just like email, you can give anyone your bitcoin public address and then anyone, anywhere in the world, can send you bitcoins.

They don’t need to know anything else about you – all they need to know is your public address and they can send money to you.

Now your bitcoin private key on the other hand is the one thing that you must protect – it’s called your private key for a reason, because you should never ever reveal it to anybody.

Now if someone were to get your email password, that would suck because they could start sending emails from your address disguised as you.

Bitcoin transactions are one way

But that’s not quite as bad as someone getting your bitcoin private key because then they could steal all of your bitcoins by sending them somewhere else.

And just like email, once a bitcoin transaction has been sent, it’s a one-way trip.  The only way to get it back would be for the recipient to send it back to you voluntarily.

bitcoin works like digital cash - once you send it to someone it belongs to them

So bitcoin literally works like digital cash – once you’ve handed it over, the bitcoin belongs to that other person.

And the same goes when you receive bitcoin -when someone sends it to you, once you receive it, it’s yours.and no one can take it away from you.

never reveal your private key to anyone

The only way they could do that is if they knew your private key, and of course now you know never to reveal it to anyone.

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