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How Do Bitcoin Wallets Work?

Bitcoin wallet is used to store Bitcoin, which is the most known of cryptocurrencies. In addition to being a very safe storage method, these wallets can be used in a variety of ways.
2020-10-12 14:30:50
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How Do Bitcoin Wallets Work?

Bitcoin, one of the most talked about topics in recent years, has been expanding its place in our lives since 2009. Bitcoin was previously known only by a number of Internet users. However, as it has suddenly gained value in recent years, it has come to the fore more than ever before on the world agenda. Naturally, the question of "What is Bitcoin” has begun to be wondered by everyone.

After Bitcoin gained remarkable value, it attracted the attention of many investors and began to be preferred.


What is Bitcoin?


Bitcoin, a cryptocurrency first discovered over the internet in 2009, has been discovered by someone or persons nicknamed Satoshi Nakamoto, who has not yet been identified. The concept that comes to the forefront in the use of Bitcoin is blockchain technology and the advantages of this technology. As a cryptocurrency, Bitcoin uses a blockchain-based infrastructure.

Bitcoin, unlike ordinary banknote currencies, is a system where there is no physical product. In other words, Bitcoin holders do not own any physical banknotes or metals. At the same time, Bitcoin is produced independently of central authority elements such as the Central Banks or Mint where countries print their money. This allows Bitcoin to show a decentralized structure. To understand Bitcoin, it is first necessary to look through the details of blockchain technology.


What is Blockchain?


Blocks consisting of blockchain data values are considered as chain structure that is not under supervision or control by any central authority. More understandably, blockchain is a pattern of networks that are created from various data and passwords, that can only be active with user activities, so that no one can control or follow it, and that do not have a certain center. Two different basic data structures are used in the blockchain. These include:

·      Pointers,

·      Linked Lists.

Pointers are variables indicating where a variable is located, not the data value, in relation to the variables used in programming. In other words, pointers do not refer to the values of the data consisting of codes; they refer to the location where these data are kept. The most important pointer of the blockchain system that came up with Bitcoin is known as hash pointer. The hash pointer has a special algorithm and is designed to prevent the chain of blocks from breaking, breaking down or being attacked in any manner.

Linked lists can be said to be an array of blocks, each containing a certain amount of data and connected to the subsequent block with the help of a pointer.


How to obtain Bitcoin


Bitcoin can be obtained in two different ways. The first of these is mining. The usual computer systems are not sufficient in Bitcoin mining works, but special processors and equipment are used. The miners implement a series of decryption protocols with the equipment at their disposal, thereby using the power at their disposal to create new blocks. In return for the creation of these blocks, Bitcoin scraping, which is also considered a specific payment or fee, takes place. Thus, in return for the equipment power spent, Bitcoin mining is realized and profit is achieved.

Another method of obtaining Bitcoin is to purchase the existing Bitcoin from someone else; that is, to transfer Bitcoin. Bitcoin transfers do not take place physically. As there is no physical product or banknote, transfer transactions are carried out through platforms known as cryptocurrency exchange.

For example, when person A wants to send a certain amount of Bitcoin to person B, data is collected and encrypted in a block during the sending process. The miners who undertake to decrypt these passwords ensure that interpersonal transfer is carried out. Bitcoin transfers are also made over the so-called Bitcoin exchanges. These exchanges receive a certain commission fee by transfers and act as intermediaries. 


How to maintain Bitcoin


Bitcoin wallet is used to store Bitcoin, which is the most known of cryptocurrencies. In addition to being a very safe storage method, these wallets can be used in a variety of ways. Simply put, Bitcoins obtained from mining or purchased from someone else are stored in these wallets. But before that, it is necessary to know what Bitcoin wallets are and their functions.


What is Bitcoin wallet?


First of all, as Bitcoin does not have a physical structure, there are many questions about how to store it in the wallet. In this regard, it should be noted that the Bitcoin wallet is not like the wallet we carry in our pockets and there is no physical product in it. Bitcoin wallets are also not an environment that holds a balance or stores existing Bitcoin.

To put it simply, the Bitcoin wallet is software that stores all the private and public keys required for the user to access the Bitcoin account; it also transfers virtual cryptocurrencies between users. This software is in constant communication with the blockchain system and enables the transmission of this request to miners when the user wants to transfer cryptocurrencies.

How to use Bitcoin wallet?


For the first time in their lives, people who will use cryptocurrencies are curious about how to store Bitcoins and are looking for the answer to the question of how to use Bitcoin wallets. There is a lot of misinformation about this issue. For example, many people think of Bitcoin wallets as a wallet we carry in our pockets or a deposit account given by banks. However, Bitcoin wallets do not hold the money they own. Because, as is known, cryptocurrencies cannot be stored at any source. Instead, transaction records stored on the blockchain infrastructure prove the existence of money.

Bitcoin wallets are software that encrypts the sending and receiving transactions on the blockchain in two different ways and allows them to be stored individually. One of these is the user's private key assigned by the system. The other is known as the public key. In Bitcoin transactions, if these two keys match, the transaction is accepted and takes place.

With the various methods used today, it is possible to protect these passwords and use them in Bitcoin transactions.


Types of Bitcoin wallets


There are various types of cryptocurrencies that allow Bitcoin storage. People with Bitcoin or other cryptocurrencies are allowed to store with software, hardware, and types of papers.

Hardware wallets are considered by many to be the most reliable Bitcoin wallets. This is because the person encrypts all of his/her data and Bitcoins and a password or code must be used to gain access. Hardware wallets are physical devices. For example, devices such as a USB flash drive or portable hard drive can be used as wallets. Thus, keys, passwords and codes created on a computer connected to the Internet are transferred to and deleted from various portable devices and prevented from being seized by Internet pirates or malicious individuals.

Paper wallets, on the other hand, are shown as physical evidence of Bitcoin storage. As the name suggests, paper wallets are printed as breakdown on paper through the printer. Each paper wallet carries a private key, a Bitcoin address, and a QR code so that it can be distinguished from others. These wallets are not considered safe by many people. Indeed, the risk of theft is very high and more difficult to maintain.

Software wallets are prepared through software and a device. These wallets are usually seen as a website or mobile application. The operating principle of software wallets is based on ensuring the protection of private keys on a device. Today, there are many websites and mobile applications that provide this service. However, only cryptocurrency exchanges that take high-level security measures such as Thodex and Bitcoin's official website and certified, trusted websites offer software wallet service as required.

 

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