Topic: HOW TO STORE AND USE BITCOIN (Read 121 times)

                                                     HOW TO STORE AND USE BITCOINS

There are simplest ways to store Bitcoin, but the simplest way is to put them on a local device. The secret key of the owner of the Bitcoin and the public information which are the identity of the coin, how much it's worth, and so on are to be adhere to when about to spend a Bitcoin. The secret signing key is something you’d better keep track of while the public information is something that shouldn’t be worried about storing, because you can always get it back when you need it.

Practically, Storing Bitcoins is really all about storing and managing Bitcoin secret keys. There are three goals to keep in mind when figuring out how to store and manage keys.

•   Availability: being able to spend your coin when you want to.
•   Security: making sure that only you and nobody else can spend your coins. Because if someone gets the power to spend your coins they could just send your coins to themselves, and then you don't have the coins anymore.
•   Convenience: that is, key management should be relatively easy to do. As you can imagine, achieving all three simultaneously can be a challenge.

Different approaches to key management offer different trade-offs between availability, security, and convenience. Storing your private keys on a local device, especially a mobile device, is a lot like carrying around money in your wallet or in your purse. It's useful to have some spending money, but you don't want to carry around your life savings because you might lose it, or somebody might steal it. So what you typically do is store a little bit of information/a little bit of money in your wallet, and keep most of your money somewhere else.

WALLET. Wallet software is especially useful because you typically want to use a whole bunch of different addresses with different keys associated with them. As you may remember, creating a new public/private key pair is easy, and you can utilize this to improve your anonymity or privacy. Wallet software gives you a simple interface that tells you how much is in your wallet. When you want to spend bitcoins, it handles the details of which keys to use and how to generate new addresses and so on.

ENCODING KEYS: Base 58 and QR codes. To spend or receive bitcoins, you also need a way to exchange an address with the other party — the address to which bitcoins are to be sent. There are two main ways in which addresses are encoded so that they can be communicated from receiver to spender: as a text string or as a QR code.

To encode an address as a text string, we take the bits of the key and convert it from a binary number to a base 58 number. Then we use a set of 58 characters to encode each digits as a character; this is called base58 notation. Why 58? Because that’s the number we get when we include the upper case letters, lower case letters, as well as digits as characters, but leave out a few that might be confusing or might look like another character. For example, capital letter 'O' and zero are both taken out because they look too much alike. This allows encoded addresses to be read out over the phone or read from printed paper and typed in, should that be necessary.

                                                                  
                                                            
                                                        1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

                      The address that received the very first Bitcoin block reward in the genesis block, base58 encoded


The second method for encoding a Bitcoin address is as a QR code, a simple kind of 2-dimensional barcode. The advantage of a QR code is that you can take a picture of it with a smartphone and wallet 102 software can automatically turn the barcode into a sequence of bits that represents the corresponding Bitcoin address. This is useful in a store, for example: the check-out system might display a QR code and you can pay with your phone by scanning the code and sending coins to that address. It is also useful for phone-to-phone transfers.

VANITY ADDRESSES: Some individuals or merchants like to have an address that starts with some human-meaningful text. For example, the gambling website Satoshi Bones has users send money to addresses containing the string “bones” in positions 2--6, such as 1bonesEeTcABPjLzAb1VkFgySY6Zqu3sX(all regular addresses begin with the character 1, indicating pay-to-pubkey-hash.)


    



SOURCES
Anderson, Ross. Security engineering. John Wiley & Sons, 2008
Moore, Tyler, and Nicolas Christin. Beware the middleman: Empirical analysis of bitcoin-exchange risk.Financial Cryptography and Data Security 2013.
hamir, Adi. How to share a secret. Communications of the ACM 22.11 (1979).
Dagher, Gaby and Benedikt Bünz and Joseph Bonneau and Jeremy Clark and Dan Boneh. Provisions: Privacy-preserving proofs of solvency for Bitcoin exchanges. In ACM CCS, 2015.
Weir, Matt, Sudhir Aggarwal, Breno De Medeiros, and Bill Glodek. Password cracking using probabilistic context-free grammars. In Security and Privacy, 2009.
Möser, Malte and Böhme, Rainer. Trends, Tips, Tolls: A Longitudinal Study of Bitcoin Transaction Fees. 2nd Workshop on Bitcoin.