How does Bitcoin work?

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This page describes the algorithm used for encrypting the wallet. The keys are encrypted with a master key which is entirely random. Although the underlying code supports multiple encrypted copies of the same master key and thus multiple passphrases the client does not yet have a method to add additional passphrases. At runtime, the client loads the wallet as it normally would, however the keystore stores the keys in encrypted form.

When the passphrase is required to top up keypool or send coins it will either be queried by a GUI prompt, or must first be entered with the walletpassphrase RPC command. This will change the how does bitcoin wallet encryption work to "unlocked" state where the unencrypted master key is stored in memory in the case of GUI, only for long enough to complete how does bitcoin wallet encryption work requested operation, in RPC, for as long as how does bitcoin wallet encryption work specified by the second parameter to walletpassphrase.

The wallet is then locked or can be manually locked using the walletlock RPC command and the unencrypted master key is removed from memory. When the wallet is locked, calls to sendtoaddresssendfromsendmanyand keypoolrefill will return Error Please enter the wallet passphrase with walletpassphrase first. When a wallet is encrypted, the passphrase is required to top up the keypool, thus, if the passphrase is rarely entered, it is possible that keypool might run out.

In this case, the default key will be used as the target for payouts for mining, and calls to getnewaddress and getaccount address will return an error. In order to prevent such cases, the keypool is automatically refilled when walletpassphrase is called with a correct passphrase and when topupkeypool is called while the wallet is unlocked.

Note that the keypool continues to be topped up on various occasions when a new key from pool is used and the wallet is unlocked or unencrypted. When wallet passphrase enrcyption becomes enabled, any unused keys from the keypool are flushed marked as used and new keys protected with encyption are added. For this reason, make a new backup of your wallet so that you will be able to recover the keys from the new key pool should access to your backups be necessary.

Implementation details of wallet encryption When the wallet is locked, calls to sendtoaddresssendfromsendmanyand keypoolrefill will return Error Retrieved from " https: Navigation menu Personal tools Create account Log in. Views Read View source View history. Sister projects Essays Source.

This page was last edited on 17 Septemberat Content is available under Creative Commons Attribution 3. Privacy policy How does bitcoin wallet encryption work Bitcoin Wiki Disclaimers.

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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 used once. The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain.

This way, Bitcoin wallets can calculate their spendable balance and new transactions can be 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 that 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 a 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 documentation , and 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 between 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.