Complete Confusion with Wallets

[cosmarchy]

Help!!  I am really really really confused with bitcoin wallets.

The problem is the more research I do the worse the the conflicting information is.

So, after all this I am turning to this forum in the hope of some sanity and accurate information.

I understand that a wallet is just an address but what I really don't understand is where this wallet is kept.  I see there are websites which offer wallets and there are pieces of software which are wallets - apart from the obvious what are the differences / advantages / disadvantages?  If I download some software and install it on my PC, I assume I have to be connected to the internet otherwise I cannot see how I could receive bitcoins.

Some forums are saying BlockChain is a good wallet provider but quite frankly I think they're a bunch of sheisters.  I did create a wallet but had to ask for help when it came to problems backing it up but I never got a reply.  When I next logged in, my secondary password settings had mysteriously been disabled.  This really did not inspire me with much confidence as I am sure you can imagine.

Also there are forums trying to steer people away from online wallets in favour of software based ones.

Would someone please enlighten me.

Thanks

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[Birdy]

Every Bitcoin address has a corresponding private key.
Imagine it like a locker for mails, if you have the Bitcoin address you can throw Bitcoins into it, but you need the key to access the Bitcoins.

So to store or receive Bitcoins all you really need is to write down adress + private key.
This is the so called Paper-wallet.
Because all Bitcoins transaction are on the public blockchain, you don't need to be online in order to receive coins, you only need to be online in order to see it.

A wallet is a collection of adresses with their corresponding private keys.
The local software will read the blockchain to see how many coins you have on your adresses and let you interact with them (it has the corresponding keys).
An online wallet is is just like that, but you have to trust the one hosting it.

Remember that everybody who has access to the private keys can use the Bitcoins on that adress.
Don't lose them, don't let anybode else get them.

Paper-Wallet or Cold wallet:
- a very secure way to store Bitcoins, because it's not online. But it's also harder to spend the coins for you
- cold wallet is keeping it in digital form, but offline (e.g. Armory client offers this)
- recommend for bigger Bitcoin sums and long time storage

local wallet software:
- your computer security is your protection of the private keys
- some clients require the full download of the blockchain (e.g. bitcoin-qt), but there are also light versions that read the blockchain in other ways (e.g. Electrum)

online wallet:
- your computer security and the one hosting the service are responsible for the protection fo the keys
- they are usually fast and easy to handle, so they are good for day-to-day purchases
- blockchain.info is a very trusted site (although the customer service may be not that great xD)
- bad for big sums or long term storage

[champsak]

Help!!  I am really really really confused with bitcoin wallets.

The problem is the more research I do the worse the the conflicting information is.

So, after all this I am turning to this forum in the hope of some sanity and accurate information.

I understand that a wallet is just an address but what I really don't understand is where this wallet is kept.  I see there are websites which offer wallets and there are pieces of software which are wallets - apart from the obvious what are the differences / advantages / disadvantages?  If I download some software and install it on my PC, I assume I have to be connected to the internet otherwise I cannot see how I could receive bitcoins.

Some forums are saying BlockChain is a good wallet provider but quite frankly I think they're a bunch of sheisters.  I did create a wallet but had to ask for help when it came to problems backing it up but I never got a reply.  When I next logged in, my secondary password settings had mysteriously been disabled.  This really did not inspire me with much confidence as I am sure you can imagine.

Also there are forums trying to steer people away from online wallets in favour of software based ones.

Would someone please enlighten me.

Thanks

Electrum is a really a really decent wallet. you dont have to download the whole blockchain and you can restore your wallet on any computer by using your private phrase.

[Epoch]

I'm sure there are many here that can provide a better explanation than I, but I'll say a few things.

- a 'bitcoin wallet' can either be online (blockchain.info, for example), or local (the standard bitcoin-qt client, for example, that can be downloaded from a link at the top of this page). There are various variations on both of these, but those details aren't mportant here.
- I use a local wallet simply because I trust myself more than I do the online wallets. A personal choice that is neither wrong nor right.

If you use a local wallet (let's use bitcoin-qt as an example), it will automatically create a file on your PC called "wallet.dat". It is a small file, only a few megabytes in size, that you can easily backup however you want (USB stick, external drive, CD, network storage, etc.). That file contains all of your bitcoin addresses (you can, and typically do, have many bitcoin addresses associated with the same wallet.dat file). "wallet.dat" is the only file you need to back up to ensure you have access to your bitcoins.

If you are running Windows 7, your "wallet.dat" file can be found here:

        C:\Users\<YourName>\AppData\Roaming\Bitcoin

You do not need to run the software, or even be online, in order for people to send you bitcoins. The only thing they need to know is one of your bitcoin addresses. You do need to be online in order to send bitcoins to others, however.

Note that if you do decide to use a local/software wallet such as bitcoin-qt, it will need to download a copy of the entire blockchain the first time it runs. This will be done automatically but can take several hours (even over a day). The blockchain is several GB in size. Electrum is an alternative to bitcoin-qt that does not need to download the entire blockchain; I've never used it.

If you use an online wallet instead, the advantages include not having to waste time downloading the blockchain, not wasting time synchronizing with the blockchain after a period of being offline, and having convenient access to your wallet from any PC with an internet connection. The disadvantage is lower security. Your online wallet can be hacked unless you use something like 2-factor authorization, or the online wallet provider can 'disappear' along with your coins at any time.

I hope that provides a bit of extra insight for you.

[odolvlobo]

The wallet concept can be confusing. Birdy's explanation is pretty good.

Just remember ... Wallets do not hold bitcoins. A wallet contains a list of the addresses that hold your bitcoins and the private keys that let you spend the bitcoins at those addresses.

[cp1]

You should checkout electrum.  The key concept is that you don't actually ever "receive bitcoins".  The blockchain is a record of which addresses have bitcoins and how much they have.  The bitcoins don't exist, so they don't "go" anywhere.  You can only "spend" bitcoins if you have the private key associated with the address that they're allocated to.

[cosmarchy]

Firstly thank you all for replies,

So the key is to back up the private key and the address...

so I guess you have to be online for the software to check it is creating a unique wallet address no one else has then I you just go online periodically just to 'sync' up with the network and see your balance.  Is that correct?

What happens if you don't go online for a month, for example?  If your balance is floating around in cyberpace, is there a timelimit where it can just get lost, swamped in the ever changing, growing data?

I downloaded both electrum and bitcoin-qt to have a play with.

I was put off with electrum as I could not find any wallet addresses.  It did prompt me with a seed and I could export my private address but I was unable to find any wallet addresses
Although this is a bit prejudice, I did think electrum looks a bit unprofessional in certain areas and the website doesn't look as if there is much in the way of support. 

After looking at bitcoin-qt, I think I'll be more comfortable with this although there are a few questions!!
The first question is about the being able to resize the far right column, or rather not being able to.  Sods law says my wallet address doesn't quite show in the width of the column however I cannot resize it.  I did take a look at github which implied it should have been fixed in the latest version but it doesn't appear to be.   Any work around?
The second question is how do you back up the private key?  I see there is an option to back up the wallet but I cannot see an option for the private key.

I assume the wallet balance is the total amount held within each of the wallet addresses or perhaps another way to look at it the multiple wallet addresses are just different ways to address the same wallet??

How can you delete addresses?

I'm using the latest version 0.8.3 BTW.

Once I'm synced on the network, can I 'export' the blockchain to my other computer so I don't have to download it again?

Thanks for your help guys.

[odolvlobo]

What happens if you don't go online for a month, for example?  If your balance is floating around in cyberpace, is there a timelimit where it can just get lost, swamped in the ever changing, growing data?

I assume the wallet balance is the total amount held within each of the wallet addresses or perhaps another way to look at it the multiple wallet addresses are just different ways to address the same wallet??

How can you delete addresses?

When you start your wallet, it updates your copy of the block chain and looks for transactions involving your addresses so that it can update your balance. The balance actually only exists in your wallet. The block chain stores all transactions and only transactions.  To get a balance, your wallet goes through the block chain and simply adds up all the transactions.

Bitcoin-qt does not give you the option to delete a receiving address because there is no benefit, and because any coins at that address would be lost and any coins subsequently sent to that address (for whatever reason) would be lost.

[Birdy]

so I guess you have to be online for the software to check it is creating a unique wallet address no one else has then I you just go online periodically just to 'sync' up with the network and see your balance.  Is that correct?

You only have to be online to check your balance (you can do that with just the address, no need for the private key, e.g. here: http://blockchain.info/) or to spend Bitcoins (private key needed).
You don't have to be online to create a new address (it's even more secure to create it offline), the chance of an address collision is extremely slim, even when you create millions after millions of addresses.

What happens if you don't go online for a month, for example?  If your balance is floating around in cyberpace, is there a timelimit where it can just get lost, swamped in the ever changing, growing data?

No time limit at all, the blockchain stores all of them.

The second question is how do you back up the private key?  I see there is an option to back up the wallet but I cannot see an option for the private key.

There are different possible ways:
Either make a backup of the wallet.dat file (C:\Users\[Username]\AppData\Roaming\Bitcoin or use file->save wallet)
Use a command in the Help->Debug->Console to obtain the private keys
Create a new address (e.g. at https://www.bitaddress.org), write down the private key somewhere and import it into bitcoin-qt to use it (also with a command)

Important to note about bitcoin-qt:
It will send change (e.g. you got a transaction of 0.8 Btc and want to send 0.5 now, you will send all 0.8 and get 0.3 change back) to a new hidden address, after about 100 transactions with change it will create new ones, so they aren't in your backup anymore.
I would suggest using the addon Coin Control with bitcoin-qt, it makes this way clearer:
https://bitcointalk.org/index.php?topic=144331.0
Also remember that whoever has access to your wallet.dat has access to the coins.

I assume the wallet balance is the total amount held within each of the wallet addresses

correct.

How can you delete addresses?

You can delete the wallet.dat, the next start it will create new addresses.

Once I'm synced on the network, can I 'export' the blockchain to my other computer so I don't have to download it again?

yes
(Don't copy the wallet.dat and use it on both computers, it works, but it will most likely get messy)

[cp1]

so I guess you have to be online for the software to check it is creating a unique wallet address no one else has then I you just go online periodically just to 'sync' up with the network and see your balance.  Is that correct?

There's no checking that your address is not in use.  You just rely on the fact that there is a huge number of addresses so the potential for overlap is very small.  If you're lucky enough to generate the same address as another person then that's great, because you can steal all their coins.

[cosmarchy]

Thanks guys 

So if I wanted to, I could take my wallet address and private key from bitcoin-qt and import into blockchain (or any other online host which allows imports) and spend its contents??  The software (if offline) or hosting website (if online) is actually irrelevant as they are only means to send, receive and view your bitcoins.  All I need are these two pieces of information.

The other thing I haven't seen much information about is a sandbox where you can 'play' with virtual bitcoins and get to know what you are doing without risking your real bitcoins.
Does this exist?  Has anyone come across such a thing?

[Birdy]

Thanks guys  

So if I wanted to, I could take my wallet address and private key from bitcoin-qt and import into blockchain (or any other online host which allows imports) and spend its contents??  The software (if offline) or hosting website (if online) is actually irrelevant as they are only means to send, receive and view your bitcoins.  All I need are these two pieces of information.

Yes, that's correct.
(You could even do with only the private key, the address to receive coins is derived from it - it just doesn't work in the opposite direction).

The other thing I haven't seen much information about is a sandbox where you can 'play' with virtual bitcoins and get to know what you are doing without risking your real bitcoins.
Does this exist?  Has anyone come across such a thing?

There is a Bitcoin testnet, but I haven't tried it.

Most faucets/free sites arent that good to test that stuff anymore, they give out too small amounts, it takes a week until they finally send something or they just give nothing. I did a lot of my tests with transactions from bitvisitor.com, maybe this is still good to go.
Just make sure it's enough to pay the fees (usually 0.0001 Btc) per transaction.
Or you could buy e.g. 0.5 Bitcoins and use small amounts to test all you want to.

[cosmarchy]

Many thanks for your help guys 

[cp1]

To test it out just send 0.05 bitcoins around to the various addresses in your wallet.