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Author Topic: Need some help on buying BTC and general info  (Read 465 times)
SZD
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March 17, 2013, 10:09:46 PM
 #1

Hi All,

I'm new to bitcoin and have been reading various FAQs and the forums. I still don't quite get where bitcoins are stored. If I mine some through a pool, they will go into a wallet in my computer? But how do I use those coins on my computer to buy stuff? Also if I bought BTC with USD on MtGox, where are those coins stored? Do I download them to my computer or does MtGox act like a bank where I can buy/sells stuff by giving out my MtGox account number?

Sorry for the noob questions, confusing to get in to all this!!
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BCB
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March 17, 2013, 10:15:26 PM
 #2

The value of bitcoin is essentially controlled by digital signatures stored in a distributed database called the blockchain.

Your wallet is a file that contain private keys.

Your wallet can be stored on:

                    1. a  hosted service.
                    2. a bitcoin client on your computer
                     3. Cold storage which is either a physical device not connected to the internet or a "paper wallet" (essentially the private written or printed on a piece of paper.

Whereever your private keys are stored they each have a corresponding public key (starting with the number 1) which is the "Bitcoin Address" we send bitcoin to and from. 

You can send bitcoin to any one of your public keys regardless of where the corresponding private key is stored.

To buy stuff you essentially send your bitcoin to the public key of the person or business you are buying from.  In the back ground your bitcoin client essentially creates a digital signature that say you own these bitcoin and that you are sending them to to bitcoin address indicated.  Your client then broadcasts this transaction to the network and once it is confirmed by 6 nodes on the network (to avoid double spending) you transaction is complete and the control of the value of those bitcoin have effectively been passed from your address to the address you sent to.

You can keep you bitcoin on Mt. Gox however Mt gox is essentially a "hosted wallet" which is probably the least secure type of wallet.  Hosted companies can get hacked.  They can go out of business.  They can disappear.  It is best you move larger amounts of bitcoin to a more secure wallet.

If you store btc on you local computer.  1.  be sure to encrypt your wallet.  REMEMBER YOUR PASSWORD. And if you EVER loose the wallet.dat file from a corrupt or overwritten hard drive or any other issue, YOU BITCOINS ARE GONE FOREVER.

When you download the offical bitcoin qt client to you local computer you have to also down load the very large blockchain (in a process called syncing).  You can not see or spend any bitcoins you receive at an address stored on your local machine until you client is "synced".  The same is true if you turn your computer is off.  You client will have to catch up with the ever growing blockchain although after the initial download, it takes significantly less time to sync depending on how long you have been on line.

Here are other ways to secure a bitcoin wallet
https://bitcointalk.org/index.php?topic=17240.0

blockchain.info/wallet is a very popular and secure hosted wallet.


Good luck
georgeu2000
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March 17, 2013, 10:20:07 PM
 #3

You can use a hosted wallet service. Think of it as an account like PayPal. Except that it is very inexpensive and fast to send and receive money.

If you don't want to use a hosted wallet, you can transfer your coins to cold storage. The keys can be stored on your computer, on a USB drive, or even on paper. This is more secure than a hosted wallet, but if you lose the keys then the coins will be lost as well.
SZD
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March 17, 2013, 10:26:24 PM
 #4

Thanks guys, and what about MtGox? Do they store my coins too like these other hosted wallet services? I'd like to exchange some USD to BTC.
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March 17, 2013, 10:28:27 PM
 #5

Well it depends. If you install a client, you can send the coins from the pool or from mtgox to your wallet on your computer. When you mine on a pool the bitcoins are stored on the pool, until you send them to your wallet. Same for mtgox, when you buy them they are on the mtgox wallet, then you can have mtgox send them to your wallet.

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