A Bitcoin wallet sends and receives bitcoin.
35JZ72myPm2HUNLHq2ozA6Z2dvbmSCFV3W – this is an example of a public bitcoin address used to receive bitcoin. A wallet can generate as many unique addresses as you need.
Literally copy & paste a public bitcoin address into the “Send” field and that address will receive the bitcoin.
Sending bitcoin has a transaction fee. The fee in most cases should be handled by the wallet software, so you shouldn’t need to worry about fees as a beginner.
Back-up & Restore
Most modern wallets use a back-up method using a “seed phrase” that is used to restore your wallet or move the wallet to another device.
- Hold Your Own Bitcoin
- Splitting Wallets
- Address re-use
- Offline Storage
Rule #1: Never talk or brag about your own bitcoin stash (if you have to, just say you have a tiny bit). Be discrete about all your personal Bitcoin holdings.
Rule #2: Use a non-custodial wallet (a.k.a wallets that puts you in 100% ownership and responsibility of your bitcoin). Never use a web wallet or an exchange to store your bitcoin.
Rule #3: Always use passwords and back-up important information in secure places.
(1.) Bitcoin Q&A: How do I secure my bitcoin? (Video)
Every Bitcoin wallet allows you to add a password for increased security. Ensure you create a password and that it is difficult to crack.
4. special character(s)
5. at least 8 characters
This password is the only measure preventing someone that gains access to your wallet from sending the bitcoin to their own bitcoin address. I suggest making multiple copies of your password and storing them in a secure manner.
Every Bitcoin wallet has a back-up feature – whether it is a back-up file, private key(s) or a seed phrase. You need to create the back-up, make multiple copies and store them securely. Examples include bank safety deposit box, or a fire + water proof vault/safe.
These back-up(s) are the only things that will recover access to your bitcoin if your device malfunctions, gets stolen, etc. Recovering your bitcoin is easy with a back-up – just import it into your new wallet.
If you are sending a large amount of bitcoin to your wallet:
1. Send a test transaction to the wallet first. Just a small amount. Then check if you received it.
2. Test backing-up a wallet and restoring it. It doesn’t hurt to test the backup to see if it actually works. Test with a small amount of bitcoin first. Do NOT wipe your existing wallet with funds in it as your test, test on another device. The same wallet can be accessed from more than 1 device because the bitcoin is not actually stored in the wallet but “in the blockchain”.
Store bitcoin on a trusted wallet that puts you in 100% ownership of your own bitcoin. You do this by using a vetted non-custodial wallet.
Custodial wallets hold bitcoin for many users and it is a large central stash that can ALL be hacked, seized by government, compromised via inside job, frozen for any reason or lost by incompetence. This results in you losing everything. Bitcoin puts you in control – don’t give that up.
Think it can’t happen to you? Just ask Mt.Gox users that lost their bitcoin from a 850,000 bitcoin “hack”. There are tons of past examples and new ones pop up on a regular basis.
Separate the bitcoin you plan to spend from the bitcoin you plan to store for long-term.
In other words, create a hot wallet for spending and a cold wallet for long-term storage. See the next “OFFLINE STORAGE” tab for cold storage options.
Avoid re-using bitcoin addresses to receive bitcoin. This will increase privacy. Remember, all transactions can been seen on the public ledger.
Storing your Bitcoin offline should be for long-term holdings and/or medium to large amounts.
Storing offline means storing your bitcoin on bitcoin address(es) that were generated on a device that is disconnected from the internet and never touch the internet. If the bitcoin address(es) and device are disconnected from the internet, the only way to steal your bitcoin is by physically stealing it. But if you created a password for the wallet, they still wont be able to access your bitcoin without the password.
How you choose to store your bitcoin for long term storage is not limited to just 1 of the methods described below and can be a mix.
1. Dedicated offline computer: Install a bitcoin wallet via usb on a clean computer that never touches the internet. First, create a back-up of the wallet and copy it to another device like a USB stick (in case your computer dies). Now, you can proceed to send your bitcoin to the wallet. Never plug the computer into the internet meaning no Ethernet cable plugged in and no WIFI.
Note: Computer does not need to be powerful.
It is possible to do offline transactions with this setup using something called PSBT. Electrum is one wallet that can do this and all you need is a usb stick and another internet connected device to generate the PSBT.
2. Physical material: You can write down your private key(s) and/or seed phrase on a durable, disaster resistant material. If you need to access the bitcoin, simply import the private key(s) or seed phrase into a bitcoin wallet.
Note: You should generate your private key(s) or seed phrase on a clean computer that is disconnected from the internet.
A private key gives you access to bitcoin stored on the paired bitcoin address – if someone gets your private key, they have access to the bitcoin on the associated bitcoin address.
A seed phrase can restore access to all your bitcoin on a wallet. A seed phrase can be encrypted with a password – so even if someone got your seed phrase, they will need your password to access your bitcoin (this is not the case with a private key). Most modern wallets use this back-up method.
3. USB: You can store your private key(s) and/or seed phrase on an encrypted USB. Make sure you encrypt the USB with a difficult password and have multiple encrypted back-up USBs because they can break or become corrupted. This method requires some extra maintenance and scheduled check-ups to ensure USBs are in working condition. Don’t forget the password to the usb(s). Only use a clean and dedicated computer that is preferably always disconnected from the internet.
4. Hardware wallet: A hardware wallet is a hybrid: you get some of the security of a device that is disconnected from the internet and the convenience of more quickly spending the bitcoin on any device you want – with minimized risks from virus infected devices. A hardware wallet connects to a device such as a computer or smartphone via USB and allows you to securely send your bitcoin. A hardware wallet will generate a seed phrase for you to back-up for restoring purposes.
Caution (for hardware wallets): Nothing is 100% secure. Hardware wallets can be susceptible to physical attacks, so do not leave them in public. Always double check the bitcoin address you are sending to, especially if you are sending a larger amount. Viruses may not be able to steal your bitcoin through access to your wallet BUT they can subtly change the bitcoin address you are sending to with one of their own. A good hardware wallet will let you visually verify the address you are sending to.
Caution (for backing-up individual private keys): In the future, if you ever send bitcoin from this bitcoin address just ONCE, the remaining balance is sent to a change address (a newly generated bitcoin address by the wallet). This means that you will need to back-up those new private keys associated to the newly generated bitcoin address(es). If you are backing up the actual private keys for each of your bitcoin addresses, there should be an export all private keys option. Most modern wallets now use a seed phrase and this is more user friendly, fool proof and recommended over backing up individual private keys.
Bitcoin Core (Full Node)
1. Blockchain.info (Reason: Company is led by bad actor(s), SegWit addresses still not implemented, incompetent developers)
2. Custodial wallets. (Reason: Your bitcoin on these wallets are now IOUs)
3. Exchanges. (Reason: Exchanges are not wallets and bitcoin on exchanges are IOUs)
“Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value.”