Introduction to Bitcoin Wallet

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Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. There are multiple ways to connect to the bitcoin network, in this post We install the reference client Bitcoin Core, also known as the “Satoshi client” and we buy a small amount of bitcoin.

Downloading the Desktop Client

We are going to start by downloading the desktop reference client that includes a wallet, a verification engine and node to connect to the peer-to-peer bitcoin network, there are versions available for different operative systems at https://bitcoin.org/en/choose-your-wallet , the following image shows how to choose the platform and download and the client:

After clicking in the Bitcoin Core icon, the following pop-up will show up:

After clicking the install button an option to choose your platform will be displayed:

Installations instructions will vary depending of your platform. If you are a windows user, an .exe file will be downloaded and all you have to do is click and then follow the instructions. If you are a mac OS user, a .dmg file will be downloaded.

After the installation you can open the client by clicking in the bitcoin-qt icon. The first time you run Bitcoin core, the application notifies you that the synchronization process will start, this process may take days as the whole blockchain is downloaded to your computer:

Bitcoin Core keeps a copy of every transaction since 2009. This database has a size of approximately 120 GB in July 2017. The client can not process transactions or update account balances until the full blockchain dataset is downloaded. The following image shows how the wallet looks after the synchronization finish:

Configuring and Encrypting the Wallet

The first security step that has to be taken in order to protect your wallet is to encrypt it. To do that all you have to do is click in settings/encrypt wallet and introduce a valid and secure password, be aware that if you loose your password, you will loose all your bitcoins:

Wallet Backup and Restore

It is very important to get familiar with the backup and restore process of your wallet. As your machine can crash at any time, you are on risk of losing all your founds if you don't manage your backups properly. The following image shows you how to create a backup, all you have to do is to to file - Backup Wallet and choose the location:

The backup process generates a .dat file. In order to restore your wallet all you have to do is to copy this .dat file in your bitcoin data directory. The default for Windows is C:\Documents and Settings\YourUserName\Application data\Bitcoin (XP) or C:\Users\YourUserName\Appdata\Roaming\Bitcoin (Vista and 7) . The default for Mac OS X is ~/Library/Application\Support\Bitcoin and the default for Linux is ~/.bitcoin

Bitcoin Addresses

You can click File/receiving addresses to see the list of your public keys, every bitcoin address is a string sequence. Most addresses start with 1 as they are personal addresses, multi-signature addresses start with 3 but I'm not going to talk about it in this post. The following image shows the default address that my bitcoin wallet has created for me:

We can generate all addresses We want by clicking File/receiving addresses/New :

Now you can send a donation to the bitcoin address 1CuBcR4Mh78He5D8kze5qxZdKfQWCVDv4t

Buying Bitcoins

There are several places where you can buy bitcoins, the following is a very incomplete list of options:

  • Buy bitcoins from a friend.
  • Use a bitcoin exchange such as kraken or bittrex.
  • Use a bitcoin ATM.

I'm buying a small amount from kraken as this exchange allows me to buy bitcoins with Euros. After buying some bitcoins from kraken I made a withdrawal by providing my wallet's address. After a couple of minutes the bitcoins were already in my wallet:

References