In order to receive Bitcoin, you need a Bitcoin address. This is basically the account number to which coins can be sent. The bitcoin address is a long string of numbers and letters.
Typing in 34 digits is of course very impractical, so there are also QR codes for the addresses that are automatically created by the wallet (your digital purse).
Bitcoin addresses are publicly visible on the Internet. You can search for it at Block cypher, for example, and see all the inputs and outputs .
Bitcoin addresses are pseudonymous accounts. You are not connected to a “correct” identity by yourself, since neither your name nor your IP address is stored. When creating a user account at a reputable bitcoin exchange, proof of identity and registration is required, just like with “normal” banks. The financial authorities or state authorities could theoretically force an exchange to transmit your identity data and the associated Bitcoin addresses. If you publish your bitcoin address on the internet or make it known elsewhere, everyone can see how many coins you own. So be careful with this and use a new Bitcoin address for each new transaction. The wallets I recommend do this automatically.
This makes it clear that Bitcoin is not as secret as it is often said to be. With enough effort, all cash flows can be analyzed. Companies like Chainanalysis specialize in these Big Data evaluations and have clients such as banks pay for this service. Bitcoin privacy protection improvements are being worked on. Payments via the Lightning network are not traceable and therefore completely anonymous.
Setting up a Bitcoin wallet: This is how it works
Digital wallet for digital money
If you want to trade Bitcoin, you need a wallet. This is a digital wallet in which the coins can then be stored. Due to the fact that there are different types of wallets, you should get an overview of the supply situation in advance.
The Bitcoin Wallet is a digital wallet for the cryptocurrency Bitcoin . The purchased coins of the digital currency are stored in this wallet, whereby coins from third parties can also be transferred to the wallet or they can then be removed from the wallet and sold. It is, so to speak, special software to be able to subsequently receive (buy) or send (sell) bitcoins.
Each wallet has a unique character code. The credit is then saved in this code. Since no third party is allowed to have access, the wallet is protected with a password. Furthermore, each wallet is anonymous. This means: Personal data is not required – personal data only needs to be provided when you register with a trading venue to purchase coins.
Wallet must be compatible with the operating system
Since there are different wallet options, you should consider in advance which device the digital wallet should be used for. There are wallets for the desktop, the tablet or for the smartphone. There are also hardware variants. It should be noted that the digital wallet must match the installed system. This means that it is important to check in advance whether it is Windows, Linux or Mac – if you use the wallet on your smartphone, the digital wallet must harmonize with the respective operating system (Android, iOS, Windows Phone or Blackberry).
Offline or online wallet?
There are pure online wallets and so-called hardware wallets . The online wallets are classic web-based wallets that then store the private keys on the server. However, this is managed by an external party. This can be a problem for some savers. Ultimately, security and control over the Bitcoin balance are entrusted to an external provider.
Another disadvantage: The wallet is always online – which means there is a constant risk of becoming the victim of a hacker attack.