Learning Bitcoin: Embrace the new world of finance

Learning Bitcoin: Embrace the new world of finance by leveraging the power of crypto-currencies using

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If you select the option to create an address and QR code, Circle will generate a new Bitcoin address for you and present a QR code to scan. You can either copy/paste the address and share it with the sender, or allow them to scan the QR using a mobile device. Figure 1.9 – Requesting money using a QR code private keys and wallets while Bitcoin addresses appear to be a string of random numbers, they are actually computed from a private key. Private keys are long strings of random characters generated by your Bitcoin wallet software. There can only be one address generated from your private key, thus your private key is both the seed and password to your Bitcoin address. important private keys are normally hidden by your Bitcoin wallet, but they can be occasionally printed on paper as a physical backup. They should never be shared publicly as they control access to your funds.www.it-ebooks.info

Setting up a Wallet[ 16 ]Bitcoin private keys generally contain 51 characters and start with a 5, such as in the following example: 5Jd54v5mVLvyRsjDGTFbTZFGvwLosYKayRosbLYMxZFBLfEpCS7 Similar to your pocket wallet with credit cards, your Bitcoin wallet is a collection of addresses and private keys. Each address is used to receive and hold bitcoin. Bitcoin Address Private KeyBitcoin  – Bitcoin addresses and private keys the preceding table, we can see how the balance in a typical wallet is composed of multiple Bitcoin addresses (in bold) with their corresponding private keys. Each address holds a balance that can be combined for a payout. While most Bitcoin software holding your bitcoin is called wallets, they are technically keychains. Keychains are designed to manage and protect your Bitcoin keys. The term wallet is a convention carried over from Bitcoin legacy software.important is not possible to recover lost private keys. If you choose to manage your own private keys, be sure that you’re able to backup and restore them. Due to the risk of loss, it should also be mentioned that online wallets are subject to the same risks. Without proper security and procedures, some online wallets have been hacked, resulting in losses. Therefore, it is advisable to choose online services that have a good reputation and offer insurance against loss. Circle and Coinbase, mentioned later in the book, both carry insurance to help protect their customers from fraud and theft.www.it-ebooks.info

Chapter 1[ 17 ]Reputable online wallets take the necessary precautions to protect your private keys. Most online wallets use a technique called Cold storage. Holding private keys in cold storage means that your keys are physically stored offline in a vault. Access to the vault is required to interact with the keys. Additionally, multi-signature addresses are used to protect the coins in cold storage. Typically, an address will require one key to transfer its bitcoins. Multi-signature addresses usually require two or more keys to sign a transfer. With cold-storage, there will often be two of three requirements so that no one employee has full access to the funds. Private keys are generated from large amounts of random data, called entropy in computer science, and are very difficult to crack. With all the computing power available today, it is not possible to find the private key of a Bitcoin address using brute force methods. Even if computing power were to exponentially increase to the point where that’s possible, the Bitcoin software can be upgraded to include new cryptographic methods to match. Transactions and confirmations Bitcoin network is essentially a public ledger that’s able to record and validate millions of transactions. Transactions validated by the network are irreversible and impossible to change or alter. In this section, we’re going to look at two core aspects of the network: transactions and confirmations.a transactions Bitcoin transaction is a record of a transfer between two or more bitcoin addresses. Similar to a credit or debit on your bank statement, the transaction records the sender, the receiver, and a date/time stamp. All Bitcoin transactions are publicly accessible. However, the user’s identity is never stored. Similar to a Swiss Bank account, only their public addresses are recorded. This makes it difficult to trace the address back to its owner. Therefore, we say that Bitcoin is pseudonymous

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