Robert Steinadler, 10 months ago
It is very important to manage your Bitcoin safely. All transactions are final and whoever has access to the private keys or the wallet seed holds the power to transfer your Bitcoins. Therefore, managing your own wallet is a huge responsibility that requires specific knowledge as well as the proper hardware and software to master the task.
In this article, we will show you how it’s done, what a Bitcoin wallet is, and also like to introduce you to LiteBit wallet, which makes a couple of things easier if you are not a tech-savvy person.
In order to hold, receive and send Bitcoins you’ll need a wallet. A wallet is software that makes a connection to the Bitcoin network and allows you to interact with it. Unlike the wallet in your pocket, a Bitcoin wallet doesn’t hold actual Bitcoins in it. Instead, it holds a secret private key that allows controlling the Bitcoin that is held on its counterpart, the public key.
Here is an example of a public key:
And this is the corresponding private key that controls the BTC that is held on the address shown in the example above:
What a Bitcoin wallet essentially does is manage all your key pairs and make it fairly easy to generate new addresses (public keys) and secure the private keys that control those addresses. The difference between the wallet solutions that are available on the market lies in the way the software establishes a connection to the network and the devices that can be used to run the wallet software.
There are five types of wallets available and each category comes with an upside and a downside:
In order to install a wallet, you either have to download it from the app store or download it from its website. For your own safety, you should only use trusted parties for downloading this software from the internet. Once the download is finished, please follow the appropriate installation process according to the wallet’s manual.
Make sure to understand the implications of using each wallet type. A smartphone can be lost, a desktop wallet might be subject to loss of data and an offline wallet might even get destroyed when a glass of water gets spilled or any other minor accident happens. An online wallet is not fully under your control but it takes away the burden of creating and maintaining backups by yourself.
A standard method to create backups is the so-called seed phrase. It consists of between 12 and 24 words and is the human-readable form of a secret from which a wallet software can derive all keys that belong to that wallet.
Usually, you want to store this valuable information on a piece of paper. It is considered to be more secure than storing it online since unauthorized people could gain access by hacking. On the other hand, each and every person that finds the piece of paper with the seed written on it also gains access.
In order to have a backup, you will also need several copies that need to be stored in different locations. This ensures that in case of an accident there is still at least one other copy available.
Another option to backup your wallet is simply saving the encrypted wallet file on several different data storages or hard drives in different locations. This option is only available with desktop and mobile wallets. You could also try to export all private keys or the master key and put them in a list, but this is very complicated and also carries the risk of losing funds. This is also the reason why the seed phrase was invented in the first place because it makes exporting and importing private keys a lot easier.
Receiving BTC is fairly easy. While the menu in that wallet of your choice may vary, the steps stay the same:
Please note that an unconfirmed transaction does not mean that you hold the BTC yet. Always wait for the confirmation!
In order to send a Bitcoin transaction, you have to follow these steps:
Please note that most wallets will determine fees according to the network’s current activity. Some of them will let you set fees manually but you need to make sure that you don’t overpay or select a fee that is too small.
Once the transaction has been sent the amount of BTC will be deducted from your wallet’s funds and the transaction is shown as pending on the dashboard which will change once the network confirms it.
The first step to ensuring safe usage of a wallet is having backups and making sure to maintain them properly. But there are also other things that you need to consider when using a Bitcoin wallet:
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