What's in a wallet?

[jamrash]

As a "Newbie," I am trying to get an understanding of Bitcoin.  I hope someone will be kind enough to set me straight.

At first I thought that I would have digital coins in my wallet.  I could even make a payment from my smart phone to a friend's smart phone via bluetooth. 

I suspect that thought process is entirely wrong.  Now, I think that a wallet needs to be backed up a single time; why?  Because the only items that need to be backed up are the public and private keys, and possibly the addresses. 

The other two items that I thought were critical, namely, the number of Bitcoins and the transaction history are not really stored in the wallet.  They are floating around on the Internet as part of the blockchain.  The critical link between the Blockchain and my wallet is my private and public keys. 

So, accessing the Internet, and thereby connecting to the Blockchain is an integral part of using a wallet.  I'm not sure it is even possible to bypass the Internet by using Bluetooth for a transaction.

Any thoughts?

[PenAndPaper]

You only need your private keys.
When you are making a transaction you must eventually broadcast that transaction to the bitcoin network so it can get confirmed. Included in a block that is.
You are not connecting to the blockchain. Blockchain is a ledger that includes all transactions that are in a way confirmed (included in a block) and so  they cannot be undone.

[fansongyi]

A wallet contains your private kep which proves your identity as the owner of the public key which is your bitcoin address

[tenior]

You can remember you wallet and you can get cash in your head 

[durdenBTC]

would the two transactions via bluetooth need to then hook up to the net in order to update?  The blockchain wouldn't know the transaction occurred otherwise

[tampazeus]

would the two transactions via bluetooth need to then hook up to the net in order to update?  The blockchain wouldn't know the transaction occurred otherwise

Yes, miners need the transaction so it can be included to blockchain

[mjc]

It's great to see newbies helping newbies.  :-) 

[jamrash]

Thanks for all the responses, which have confirmed my own assumptions.  Recently, I conducted an experiment.  I created a wallet and funded it.  I then backed up the wallet, after which I spent all the funds except for .02 of a Bitcoin.  Next, I deleted the wallet, recreated it and restored the backed up version, which had an original amount of 4 Bitcoin at the time of the backup. 

As you all know, as soon as the  wallet connected to the network, the ledger adjusted, removing the 4 Bitoin and replacing it with the .02 Bitcoin.  This seems to confirm what you all have said.  The backup file contains the private key, while the blockchain contains the amounts and transaction history.

Thanks again,
Jamrash

[jamrash]

I just have to add this comment: I've been involved with several e-currencies before.  They have all relied on a third party to tally up the debits and the credits.  And, this was the weak point.  The user had to trust that the third party would be honest and that it would be able to protect itself from predatory authorities.  I have incurred losses on both counts. 

It is beginning to dawn on me that the genius of Bitcoin is that it does not rely on any third party for the accounting.  This vital part of the process is handled by Bitcoin itself. There has never been a currency like this in all the history of mankind!

If, like Amir Taaki, I had cottoned on to this out a few years ago, I would be sunning myself in the Bahamas right now, sipping a Pina colada.

[PenAndPaper]

It is beginning to dawn on me that the genius of Bitcoin is that it does not rely on any third party for the accounting.  This vital part of the process is handled by Bitcoin itself. There has never been a currency like this in all the history of mankind!

Exactly. The fact that it is decentralized in the way it handles transactions and minting of new coins is one of the things that makes it unique.

Also don't worry about not being in bahamas already. You may be there next year 

[Mondy]

Your bitcoins of course which can be accessed by a private key!

[durdenBTC]

would the two transactions via bluetooth need to then hook up to the net in order to update?  The blockchain wouldn't know the transaction occurred otherwise

Yes, miners need the transaction so it can be included to blockchain

So if the transaction occurred via bluetooth, the person receiving them couldn't respend until they went back online? 

[DannyHamilton]

So if the transaction occurred via bluetooth, the person receiving them couldn't respend until they went back online? 

There are some fraud risks since the person who sent you the transaction over bluetooth could go to the network and spend those exact same bitcoins sending them somewhere else.

Since the network never saw the bluetooth transaction, it would accept this second transaction as if it were the "only" transaction.  The network transaction would get confirmed into the blockchain.  Then later when the receiver of the bluetooth transaction connected to the internet and tried to broadcast the transaction they received, all peers would reject it as invalid (since it's inputs would already be spent).  Therefore the receiver of the bluetooth transaction wouldn't have the bitcoins at all, he'd just have a useless invalid transactions.

Now that we've gotten past the fraud risk, there is a possibility for this to work in high trust situations.

If you and I had some reason to trust each other, I could send you a bluetooth transaction and agree not to double spend those inputs online.  Then you could use those funds to send a bluetooth transaction to someone else that you have a high trust relationship with.  The requirement would be that you'd have to send them both the transaction that you received from me AND the transaction you are attempting to send them.  Otherwise the wallet they are running won't be aware of the transaction that I sent you, and won't know that your transaction is valid (since it won't yet have seen the inputs you are trying to use).

[DannyHamilton]

Your bitcoins of course which can be accessed by a private key!

And yet there are no actual bitcoins in the wallet.

If you don't know what you're talking about, please don't waste people's time and confuse newbies with random guesses that are completely useless.