Bitcoin wallet private key explained
As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be bitcoin wallet private key explained once.
The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are bitcoin wallet private key explained in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can bitcoin wallet private key explained verified to be spending bitcoins that are actually owned by the spender.
The integrity and the chronological order of the block chain are enforced with cryptography. A transaction is a transfer of value between Bitcoin wallets bitcoin wallet private key explained gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued.
All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining. Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system.
To be confirmed, transactions must be packed in bitcoin wallet private key explained block that fits very strict cryptographic rules that will be verified by the network.
These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain.
This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends. This is only a very short and concise summary of the system. If you want to get into the details, you can read the original paper that describes the system's design, read the developer documentationand explore the Bitcoin wiki. How does Bitcoin work? This is a question that often causes confusion.
Here's a quick explanation! The basics for a new user As a new user, you can get started with Bitcoin without understanding the technical details. Balances - block chain The block chain is a shared public ledger on which the entire Bitcoin network relies. Transactions - private keys A transaction is a transfer of value bitcoin wallet private key explained Bitcoin wallets that gets included in the block chain.
Processing - mining Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. Going down the rabbit hole This is only a very short and concise summary of the system.
In this guide I will introduce you to private keys, their importance inside a cryptocurrency wallet and the reasons why you must back them up securely. I will also be making a recommendation on where to safely store your private keys.
As always anything I write is bitcoin wallet private key explained financial advice and I am simply sharing my experience with private keys and cryptocurrency bitcoin wallet private key explained.
A private key is a string of numbers that represent a cryptocurrency inside a wallet. Below is an example of a fictitious private key:. The role of a private key is to give anyone who knows the private key unrestricted access to the crypto asset Bitcoin, Dash, etherium etc it represents. The private key by definition proves ownership of a crypto asset.
In the physical world you use a pen to sign a cheque to authorise payment. In the cryptoverse the private key is used to sign a transaction and authorise payment. The difference being that the private key is encrypted, not publically visible and authorises the transaction in the background - neither the sender nor the receiver see the private key. For example when you want someone to pay you 0.
The majority of mainstream cryptocurrency wallets like Exodus or Jaxx have a seed consisting of at least 12 bitcoin wallet private key explained. Whilst this is unlikely, how about if the wallet software stops supporting a particularly cryptocurrency? This happened in when the Exodus wallet stopped supporting Dogecoin.
In either of the eventualities I mentioned previously, you would need to move your cryptocurrency assets to different software wallet - the only way to do this is by backing up the private keys and importing them to the new wallet. There are so many different types of wallet, each cryptocurrency has its own wallet and there are wallets that support multiple currencies. When you export private keys from a wallet, they will normally save in a csv spreadsheet format which can be printed off or saved.
My recommendation is to save the exported keys to two or more quality USB memory bitcoin wallet private key explained like the Kingston DataTraveller and put them in separate physical locations in case of fire. When you save the private keys to a USB drive, you must somehow protect the keys from being seen should someone unauthorised get hold of them. I recommend using VeraCryptan open source encryption software that runs on Windows, Mac and Linux to do this.
The encryption process uses a master phrase to protect the keys and without bitcoin wallet private key explained phrase your keys cannot be revealed. I will be writing a how to guide in the future on using VeraCrypt to encrypt your private key backup. Remember with cryptocurrencies there is no bank helpline to call and you are the bank manager! Just like your bank has a system of passwords and memorable phrases to recover your bank account, so to do you need a system to recover your wallets should something bitcoin wallet private key explained.
I love helping you manage your cryptocurrency portfolio easily and training you how to use crypto wallets securely. If you need assistance do get in touch. If you like what you have read and are feeling generous, feel free to donate any amount to one of my Crypto public addresses:. Read here to know the importane of keeping your crypto funds safe - https: The importance of a wallet's private keys and how to back them up. What is a private key? Below is an example of a fictitious private key: What are private keys used for?
What is a public address? Why you should backup a private key? How to protect your private key backups When you save the private keys to a USB drive, you must somehow protect the keys from being seen should someone unauthorised get hold of them.
Personally I recommend giving that master phrase to bitcoin wallet private key explained close friend or relative whom you trust. A very private affair! Authors get paid when people like you upvote their post.