What's the difference between a public and private bitcoin address?

There is more to a bitcoin wallet than just the address itself. It also contains the public and private key for each of your bitcoin addresses. Your bitcoin private key is a randomly generated string (numbers and letters), allowing bitcoins to be spent. A private key is always mathematically related to the bitcoin wallet address, but is impossible to reverse engineer thanks to a strong encryption code base.

As mentioned, there is also a public key. This causes some confusion, as some people assume that a bitcoin wallet address and the public key are the same. That is not the case, but they are mathematically related. A bitcoin wallet address is a hashed version of your public key.

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Can You Trust the Idea of Bitcoin

With bitcoin, trust has to work on both sides. Even though you as the user are always in control of your own finances, you still have to trust the rest of the bitcoin network to not drop off the face of the earth tomorrow.

The concept about bitcoin that people have the most difficulty with in terms of trust is decentralization. As mentioned, bitcoin is a decentralized digital currency, which means there is no central point of failure that would cause the bitcoin network to not recover. Every individual user is an integral part of the bitcoin ecosystem, so it would take a nearly impossible amount of collaboration in order to shut down everyone at the same time.

Trusting bitcoin technology

Human nature tells you to keep doing things the way we have been doing them. Beware change. When the Internet came around in the early 1990s, few thought it would ever become a commonplace, household service. It was for geeks. Yet look where you are now — everybody’s grandparents and their pet dogs are on the Internet. That being said, the transition from no connections to people all over the world being connected was a big change.

Bitcoin is often compared to the early Internet, a new and disruptive technology that seems to be far ahead of its time. In part, that’s true, as bitcoin is solving a technological problem that most people don’t think about in the first place. Not because the evidence isn’t there, but simply because human nature rejects changes as long as things “still work fine the way they are.”

Trusting bitcoin as currency

As previously noted, bitcoin is not a proper currency in its truest sense, but rather an alternative, digital method of payment. Granted, you can buy and sell services and goods in exchange for bitcoin, but the monetary aspect lacks certain features required for it to be considered as a true “currency” in the traditional meaning.

Nevertheless, lots of merchants put their trust in bitcoin as a payment method, simply by accepting it alongside more traditional ways of paying. The reasons are fairly simple:

• No extra costs associated with accepting bitcoin payments
• No additional infrastructure to set up

How Bitcoin Works

Bitcoin is changing the way people think about money by planting a seed of doubt in people’s minds — in a positive and thought-provoking way. Mind you, given the financial crises over the past decade, it’s understandable that some people are trying to come up with new and creative solutions for a better economy. Bitcoin, with its transparency and decentralization, may prove to be a powerful tool in achieving that goal.

One thing bitcoin does is bypass the current financial system and could therefore potentially provide services to unbanked and underbanked nations all around the world.

Bitcoin Fees

Bitcoin is often touted as a global payment network that includes no transaction fees. Up to a certain extent, that statement is true, but it doesn’t tell the entire story. No transaction fee is involved for the recipient on any bitcoin transaction coming from another user on the network. But sometimes, there is a transaction fee involved, albeit very minimal.

Transaction fees in the bitcoin world are not included in every transaction. In fact, most bitcoin wallets allow the user to optionally include a transaction fee in order to speed up the transaction itself. By speeding up, a transaction including a small fee will be prioritized to be included in the next network block, whereas transactions without fees have a lower priority.

How Bitcoin Transactions Work

At its simplest, a bitcoin transaction works by you giving someone else a designated amount of the BTC you own. In order for a bitcoin transaction to be deemed “valid,” there has to be at least one input, although multiple inputs are possible as well. An input is a reference to an output from a previous transaction.

Note that every input associated with a bitcoin transaction has to be an unspent output of a previous transaction. Furthermore, every input in a bitcoin transaction must be digitally signed, which occurs through the private key associated with the bitcoin address initiating the transfer of BTC.

How to Secure Your Bitcoin Wallets

In the same way that you wouldn’t walk around with your real wallet hanging out of your back pocket, or keep your bank card PIN number on a piece of paper inside that wallet, you need to be security conscious about your bitcoin wallet, too.

Secure mobile bitcoin wallets

A mobile bitcoin wallet is convenient to use, because it can be installed on either a tablet or smartphone. Either of these devices is more often than not in close proximity to everyday consumers and doesn’t require users to take additional items with them wherever they go.