Understanding where your BTC are and how you access and transfer them
The Crypto ELI8, or Explain Like I’m Eight, series is for anyone who wants to learn about the exciting world of cryptocurrency. Each post is organized around a specific term, concept, question, or other topic related to crypto.
For more on what the series is and a full list of posts check out this series guide.
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What comes to mind when you hear the term “wallet”? Most people think of a place to store their dollar bills, credit cards, and maybe even a picture of their crush. Bitcoin wallets are a little different though. After all, bitcoin is digital so it doesn’t make much sense to try to store it in your pocket. In this post, we’ll take a look at what a bitcoin wallet is (and isn’t) as well some important tips for getting started.
Imagine this…
KidzKonnect is a new app. It lets kids from all over the world send messages to each other so they can learn more about different cultures and traditions. You can even connect with kids who speak different languages because the app automatically translates for you.
To get KidzKonnect and start meeting kids from around the world, all you need to do is download the app and set up an account. Setting up an account is as simple as making up a username and setting a password. Your KidzKonnect username is what kids use to send messages to each other. You can share your username with anyone that you want to be able to send you messages. But your password is different.
You don’t want to share your password with someone else because, if they have it, they can log into your account. That means they can send messages from your KidzKonnect username and pretend to be you!
So, to be safe, make sure you keep your password in a secret place that you’ll remember but no one else will be able to find. That way, you’ll be able to connect with kids all over the world.
So, what is a bitcoin wallet?
In bitcoin, wallets are like a KidzKonnect account — the username and the password. Wallets allow you to send bitcoins with other people and tell you how many total bitcoins you have.
Wallets consist of two main parts: public addresses and private keys. Public addresses can be shared, just like your KidzKonnect username. Your public address is what you give to another person when you want them so send you bitcoins, and vice versa. Just like a KidzKonnect message can’t be taken back once it’s sent, sending a bitcoin to a public address is a one-way street. The only way to get it back is if the person you sent it to sends it back to you. (Or, more specifically, if the person whose wallet is associated with the public address you sent it to, sends the same amount of bitcoin back to your public address.)
Private keys, on the other hand, should never be shared. They are like passwords to access your bitcoins. If someone has your private key then they can access all the bitcoins tied to it, which is bad news because that means they can send your bitcoins wherever they want!
Let’s look at the KidzKonnect example again. When you get a notification that a new message is in your message center, you don’t know what the message says until you log into your account. So, to view the message, you need to enter both your username and password. The password is how the system knows it’s safe to open the message.
A helpful way to remember the basics of a bitcoin wallet is to think about the KidzKonnect example:
KidzKonnect account = username + password
…..is similar to…..
bitcoin wallet = public address + private key
Of course, there are more details to fully understand bitcoin wallets. For example, how the wallet actually “stores” the bitcoins, how the private key is used to create the public address, how multiple private keys can be tied to a single wallet, and, of course, the different types of wallets. But that’s more like a 15-year-old level of understanding. For now, we’ll leave it at the basics illustrated in the KidzKonnect example.
Summary
A bitcoin wallet is a software tool that allows you to connect with the bitcoin network by sending bitcoins to others and telling you how many bitcoins you have.
Wallets consist of two basic things: a public address and a private key. A public address is like a username. It can be shared. It’s how others know where to send bitcoin. A private key is like a password. It should never be shared. It’s how the wallet knows which bitcoins belong to you. If someone knows your private key they can steal your bitcoins so make sure to keep your private key secret and in a safe place you won’t forget!
