Topic: HOW are bitcoins stored? - page 3. (Read 5764 times)

Wow. Your a piece of shit.

You're welcome.


Actually, a wallet is a collection of one or more private keys. Each wallet has a different set of private keys.


Yes.  Or more specifically, a wallet has one or more addresses (each private key has exactly one bitcoin address). Each wallet therefore has a different set of addresses.


At a basic user level, this is a pretty good way to think of it.  The technical details are a bit more complex than that.


Correct.  The wallet has the private keys that allow you to create digital signatures that can be verified with a matching public key.  The signatures prove that you have the authorization to re-assign that value.


You are asking about some VERY COMPLEX mathematics.  You either need to learn a lot of maths, or you need to be willing to except that the following process has been worked out by expert mathematicians and that it works.

A private key is a VERY BIG number.  A number so big and random that nobody can ever guess it.  From that number using the ECDSA (Elliptic Curve Digital Signature Algorithm) a public key can be generated.  The public key can be safely given out to anybody, and they won't be able to calculate what the private key was that was used to generate it. Any data (such as a bitcoin transaction for example) can be converted into a numeric representation.  Using the private key and the numeric representation of the data, it is possible to calculate another number (a digital signature of that data).  Using the public key, it is possible for anyone to validate that the matching private key was used to generate the signature, even though the private key isn't know.  If any of the data changes (even a single bit), then the digital signature will no longer match, and everyone will know that the data presented was not the data that was signed.  Therefore, it is possible to create and then sign a transaction, and nobody can modify the transaction on you without re-signing the transaction with the private key.  As long as you are the only person that knows the private key, you are the only person that can create valid verifiably signed transactions.

A bitcoin address is a public key that has been converted (through a function called a hash) to a numeric representation.  This number is then represented in base58 resulting in a sequence of letters and numbers.  As such, any private key can generate a single matching public key (through ECDSA) and then that public key converts to a single bitcoin address (through hashing and bas358).


Correct.


Correct.  Each wallet has a collection of one or more private keys, and therefore has one or more bitcoin addresses.


It is your responsibility to protect your private keys from theft.  Just like it is your responsibility to protect the physical cash in your physical wallet from theft.


If you are using a computer that has malware (such as a keylogger on it), then it is absolutely possible for the private keys (and therefore the bitcoins) to be stolen.  This is why the people who are working with significant amounts of bitcoins will generally use a computer that is not connected to the internet at all.  They will disconnect the internet, completely wipe the hard drive, install a fresh copy of a trusted clean operating system, and use this to generate and store their private keys.  


Correct.  Each wallet controls a set of one or more unique addresses.


Correct.  The private key (and frequently the associated bitcoin address) is printed on the paper for safe keeping.  The private key is then wiped from any and all computer systems so that it is impossible for any hacker to access the private key.


If you are using a computer that has malware (such as a keylogger on it), then it is absolutely possible for the private keys (and therefore the bitcoins) to be stolen.  This is why the people who are working with significant amounts of bitcoins will generally use a computer that is not connected to the internet at all.  They will disconnect the internet, completely wipe the hard drive, install a fresh copy of a trusted clean operating system, and use this to generate and store their private keys.  


There is no such thing as 100% sure in this world.  You can get close if you use a computer that is not connected to the internet, has never been connected to the internet, and never will be connected to the internet.  Then wipe all traces of the private key from the hard drive when you are done.  Even then though, it is possible that sombody might have a spy camera watching what you are doing and they can see the paper, or somebody might find where you've hidden the paper.


Yes.


If the user allowed malware (or any other method) to leak their private keys to someone else, then the bitcoins can be stolen since the person that has the private keys can create transactions and sign them.


Protect your private keys.


Consensus.

The entire bitcoin system runs on consensus.  The protocol that every peer is running would refuse to recognize any transaction that creates more than the appropriate amount of bitcoins.  If you could convince enough users to run a different protocol that allows extra bitcoins, then you would have two separate consensus systems, one that recognizes the additional "bitcoins" and one that refuses to recognize them.  This would essentially be another "altcoin".  The creators and users of this system might try to call thier system "bitcoin", and this might cause confusion between users of the "old bitcoin" and users of the "new bitcoin", but the two systems would be incompatible with each other.  They would essentially be two distinct crypto-currencies that are fighting over the same name.

If you could convince EVERYBODY to use software that runs the new protocol that allows additional bitcoins, then bitcoin would allow additional bitcoins.  Fortunately that would be impossible, because I can already tell you with certainty that I will not run such a new protocol.  I'm pretty sure you can find many others that would do the same as me.  As such, while it might be "technically possible" to modify the protocol to allow additional bitcoins, it isn't "realistically possible" since you can't convince EVERY SINGLE BITCOIN USER IN THE ENTIRE WORLD to run a protocol that is modified in that way.


The protocol defines the acceptable way to put new bitcoin value into circulation.  Any other attempt will be rejected by all peers.


The software is open source.  All computer programmers in the world have access to the program so that they can see exactly how it works.  They can compile that program and verify that the resulting executable is exactly the same as the one that is provided for download.  As such, it is impossible to "hide" anything about how bitcoin works.

If it was possible for someone to "take control of certain amounts of BTC", then some programmer somewhere would point that out and other programmers would verify what was being said.  Then nobody would have ever decided to use such a system since it couldn't be trusted.


You're welcome.

It´s amazing that someone thought about all of that stuff and programmed the bitcoin to address all of those issues. What I had in mind about to whom the initial 21M would be given - I imagined to the creator of Bitcoin, who would sell them very cheap and then the prices would of course start to raise with time. So I understand he preferred to create a system in which people mine and therefore the system as a whole is more safe from attacks.

And another question: What if Satoshi Nakamoto or whoever made BTC actually, secretly has the control of BTC and can e.g. change the software or take control of certain amounts of BTC? How can anyone be sure no one has control of BTC? Is BTC a software that was designed to be impossible to control? Including by the creators?

The mining serves two purposes.  First, as an issuance mechanism:   Proof of work
for solving the blocks is much more fair than just giving away the coins (to who?)
at the genesis of the currency.  By offering a free and open competition, anyone
with the resources to mine for Bitcoins can do so, thus establishing an equitable
distribution.

Second, mining serves as a security mechanism for the entire network.  Because
it takes computational work to solve the blocks, no one can just come in and
start adding blocks to the blockchain without participating in the mining process.
This process incentivizes people to spend their resources honestly collecting rewards
because it is more profitable to do so than to try to use those resources to attack
the network.

Thanks, Jonald. One more question: Why do bitcoins need to be mined? Why the 21 million weren´t created all together at the beginning of BTC?

You're starting to get it.  Keep in mind a wallet can have multiple addresses.  Each address has a private key.
Yes, keyloggers are possible, which is why the highest saftey is with offline computer, also known
as "cold storage".  I really haven't heard of offline bitcoins being stolen.

As far as the issuance of new Bitcoins and the limit of 21 million, that's built into the protocol
code itself.  Every 10 mintues or so, a new block is generated (this process is called mining),
and there's a certain number of coins that the winning miner receives (called a coinbase transaction).
The reward keeps halving about every 4 years, with the last fraction of a coin being awarded
in the year 2140.  The sum of all coin rewards is slightly less than 21 million BTC.

If someone tried to rewrite the code to just give themselves more coins, it wouldn't
be recognized by anyone else on the network.

Private keys generate public addresses via complicated math known as elliptic curve
cryptography, the details of which I won't elaborate on here but you can research
easily.

To be honest, I could understand just 10% of what I read, so I left it to read in the future when I understand better about the words/concepts being used.


What do you mean about "bitcoin addresses generated from the private keys"? How exactly does a "private key" (btw what is a private key in the first place) generates a "bitcoin address"? And I´m assuming that means that for every different private key there is a unique BTC address, which means that for each wallet there is at least one unique BTC address, right? So far, I understand that the only thing thieves shouldn´t be able to steal are my "keys", but how can I be sure about that? Isn´t there always a possibility of some keylogger spying what I´m doing?


Ops, I guess this answers at least one of my questions, so each wallet does control a unique address in the blockchain, right? So does that mean that a "paper" wallet is a wallet which key is not stored on any computer, and that key is associated with an address on the blockchain? But at least before you note the key down or print, it will have to be shown on the computer, so does that mean keyloggers can still steal it? How can I be 100% sure it will not be stolen, even during the small amount of time I take to put the key on a piece of paper?



Yes, but aren´t there cases of BTC stolen from offline wallets too? How can that happen and how that can be prevented with certainty?

And more questions: What prevents the total number of BTC to be higher than 21 million? And what prevents anyone from creating bitcoin?

Thanks for the answers.

Right? Everyone here has a vested interest in Bitcoins success, it makes no sense to be rude and an asshat to new adopters

Thanks everyone for the answers. Ok, the wallet contains private keys to spend coins. But that must mean that each wallet has a different key, right? Does that mean that each individual wallet must have a different blockchain address?

In other words, if I send 1 BTC from wallet A to wallet B, what I actually did was sending 1 BTC from blockchain address A to blockchain address B? And the wallets just store the keys to controlling the addresses?

What?!!!  Are you kidding me?  How DARE you call me a moron!!!  I demand retraction.  I'll report you to the moderator if I can't have my written apology before the next block!  

Agreed.  If one won't help, why join the discussion?

I miss the old ignore button with the colors showing who was ignored a lot. It was useful (but a server drain.)

Don't really get the point of insulting people who are seeking more information about Bitcoin.
To me, that is moronic.

The moderators generally don't put to much effort into preventing people from picking on each other here.  If you don't like something someone is saying, you can just click the "ignore" link under their userID next to their post.

If you haven't read it yet, then you really need to read the bitcoin whitepaper before you ask any more questions.  Here's a link to it for you.
https://bitcoin.org/bitcoin.pdf

Once you've read that, let me know if you have any additional questions.


The wallet stores your private keys.  Electronic wallets also provide a user friendly way to create, sign, and broadcast transactions that re-assign the value that is associated with the bitcoin addresses that are generated from the private keys.  Most wallets also provide a way to keep track of how much value your private keys provide control of.


At a bare minimun, your private keys.  Most wallets also contain the bitcoin addresses that are generated from the private keys so that they don't need to be re-generated every time you need to use them.  Electronic wallets (and wallet software) generally keep track of all the unspent transaction outputs that provide value that the wallet has the ability to re-assign.  Some wallets also provide a way for you to create notes to yourself that can be attached to addresses or transactions to remind you later what they were for.


The typical way is to use the wallet software from the first wallet to create a transaction that assigns the value to an address under the control of the second wallet. The wallet software handles using the private key to generate a digital signature that authorizes the transfer and handles broadcasting that transaction to the network.  Eventually the transaction makes it into the blcokchain and the value is then under the control of the second wallet.


There are services online that will offer to hold the bitcoin for you.  Essentially you transfer control of the value to the service, and then you trust them to send it back to you (or to send it anywhere else that you ask them to send it) whenever you request it.  Many of these services have turned out to be scams.  After the users transfers control of the value to the service, the person that runs the service disappears and keeps control of the bitcoins for themselves.


Yes.

Wallets hold the private keys to spend the coins.  you move coins from one wallet to another by spending the coins (signing transactions with the private keys).  Theft happens when someone gets hold of your private keys.

I had already seen it. I get that bitcoin amounts are stored in the blockchain, but then what are wallets used for? What does a wallet actually contain? How can you move bitcoins from a wallet to another? Why people say they stored their bitcoins online and they were stolen? Can anyone answer those specific questions?

Bitcoins are stored in a ledger, people run nodes which record these transactions.
In simple words

Think of it as a book some people keep copies of these books on their computers.
Whenever someone adds a page to the book they all recieve it at the same time and add it to their copies.

Since everyone has the same book and is in agreement on the number of pages and of what is written in the book their is a consensus.
Bitcoins are stored as a history of transactions over time.

This is one of the best videos to help get you up to speed:

http://m.youtube.com/watch?v=Um63OQz3bjo

I reported TKeenan´s post, who implied I am a "moron" and an "idiot" to the moderators. I will also not answer the rest of his post, although I want to, because I refuse to talk to someone so impolite.


So, what I get so far is that a BTC (does BTC mean a bitcoin?) is nothing more than a quantitative information stored on the blockchain and associated to your BTC address, right? But if that´s true then what prevents the total number of bitcoins from exceeding 21 million?

And ok, so a wallet does not actually contain bitcoins, it just contains your code needed to move bitcoins from your blockchain address to another address, right? Then why does the wallet show your number of bitcoins and why can you move bitcoins from a wallet to another? If the code is the same, how can bitcoins be moved through wallets?

this will help https://en.bitcoin.it/wiki/Private_key