Topic: What is a Bitcoin in my computer? An archive, an abstract value? (Read 2107 times)

The way I try to explain it to less technically savvy people is like this:

Imagine a gigantic wall made of hollow glass bricks. They're clear on your side and opaque on the reverse side. Each brick has a unique number identifier on it. And each brick has money inside it or perhaps no money at all. Are you imagining this big wall? Good. Now imagine that anyone in the world can walk up to any brick they like and see how much money is inside. Since this is usuable by the whole world, you cannot use ordinary US dollars, or Chinese RenMinBi, or Russian rubles. You would first have to buy special tokens. These tokens all have the same value but each world currency would buy a different amount of tokens. There is even a slot where anyone can put any amount of tokens they like into any brick they like without the knowledge or consent of the owner of that brick. There is no way of knowing who owns which brick(s) and there is no way to get the tokens out from this side of the wall. Attached to each brick is a log that shows each time tokens were put in and taken out and records which bricks the tokens came from and where they went to, but not the owners of those bricks, which, as I said before, no one actually knows.

On the reverse side of the wall, all of the bricks are opaque but there is a keyhole in each which opens with the correct key. If you had the key and knew which brick to open you could remove any amount of tokens from it. It would not matter who rightfully "owns" it. It only matters if you have the key. (Although you could try any random key on as many keyholes as you like, the possibility of it actually working is so minute that it essentially is impossible. You would have better odds of picking the winning lottery numbers on the next 1,000 drawings in a row!) Multiple people, however, could have the key if the "owner" either gave it to them or was careless with his and allowed them to copy it. I say the wall is opaque from the other side because there is no way of seeing who is removing tokens from each brick, you can only see where the tokens move to and from. If you "owned" a brick, you could give your public address to someone and they could deposit tokens into it but they would have no way of getting those tokens back without the private key to open that brick and remove them.

Think of the blockchain this way. It exists "out there" and anyone in the world can see it and can see the balances of each address. But no one knows exactly who owns which address. The public key is the address of that brick. The private key is the key that opens that brick. And "bitcoin" is simply the unit of measurement or the name we give to the numbers of tokens that make up each account. (I know this is not 100% accurate but for sake of simplicity I explain this way.) In the real world you need three things to own and spend Bitcoin: a public key, a private key, and some sort of software connected to the Internet that knows how to interact with the Blockchain. This is what your wallet is. It is the software that "talks" to the Blockchain. You can give it one or any number of public/private pairs you like and it will take care of the rest. It is not necessary to back up a wallet. The only thing you actually have to back up are the keys, which are just a unique series of letters and numbers or, in reality, two unfathomably huge numbers. There is no limit to how many addresses you could own. If I ever sent or received Bitcoin from "you" then I could remember that you owned that address and can now see all of your transaction history if I like. With some effort, I could trace every bitcoin you ever sent and where it was sent to. As a side note, work is currently being done on "mixers" which scramble this information preventing any way of tracing transactions back to their source.

You can always change, remove, or install a new wallet without worrying about transferring balances from one wallet to the other. The only things you would have to transfer are the keys. The balance does not exist on your computer nor in the wallet. It exists only as the sum of all transactions attached to the public address on the Blockchain, this nebulous ledger which exists "out there" and is maintained by the collective agreement of a myriad of computers and math. The Bitcoin protocol and the Blockchain seem to be, at least so far, unbreakable. The real danger in Bitcoin is currently in the wallet. If someone had access to your computer or smart phone, they could potentially have access to your wallet and there would be no recourse and no one to complain to if your account was cleaned out. This is why I go to such great lengths to explain the basics behind the Blockchain. Because ultimately, security is up to the user, not the software. A Bitcoin wallet can be the most secure software ever created but if you keep your public/private pair written on a piece of paper in your leather wallet in your pocket, then you would be at risk.

even the "balance" isn't stored as a unit of data.  it too is derived from spent and unspent transaction inputs and outputs from the blockchain.

This is really useful for my english paper

think of it as money placed in your bank account, bitcoin in your wallet is like some numbers on a piece of paper which bank gave you. is that abstract?

This video (and every other one from that YTer) is excellent learning material.

Bitcoins only exist as a balance associated with a bitcoin address.
What you actually need to keep is the private key, that is like a password that allows you to spend from the corresponding bitcoin address. It is made of 256 bits, that is, 256 zeros and ones.

A private key is a secret code which allows the user to prove his ownership of his Bitcoins. Every Bitcoin address has a matching private key, which is saved in the wallet file of the person who owns the balance. The private key is mathematically related to the Bitcoin address, and is designed so that the Bitcoin address can be calculated from the private key, but importantly, the same cannot be done in reverse.

When a bitcoin address is "created" you are not actually creating it.
You just pick a random private key, that is, a random string of 256 bits, and the corresponding bitcoin address will be yours.

See this video for better understanding:
The Amazing Math Of Bitcoin's Private Keys
https://www.youtube.com/watch?v=ZloHVKk7DHk

A private key that allows you to control a bitcoin wallet, nothing more, nothing less.

Bitcoin is a account book which record which address owns how many coins.

bitcoin actually is nothing in your computer, bitcoins are only in the blockchain and in your computer you have the keys to move bitcoins in the blockchain

here are your Bitcoins:




 

sorry, no coins 


@ToshiOcean

not mine  

I don't know about the OP, but I'm saving a copy of this thread. All of these replies are outstanding, and extremely helpful.

When bitcoin store on your wallet, that bitcoin will be your mine.
bitcoin on your comp is just numeral, but have a value when you exchange.


~iki

the coins are actually inside your mouse... you can access them by removing that little battery cover, pulling out the battery and then shaking really really hard.  if that doesn't work, reboot your mousepad and try it again.

Well one could somehow compare your computer with a bank, and say that it is your own bank. Depending on the security level of it, your funds are either safe, or not.

Everyone who is running the Bitcoin program has a long list of transactions stored in a file on their computer called the blockchain. Transactions occur between addresses that look like random strings of uppercase and lowercase letters and numbers such as 1H9AaiUjuPzTtHD99FxsBGhWFuZgPUrc5M. These computers communicate with each other so that the blockchain that exists in every single computer is identical.

What you might also have is something called a "private key". This is a little bit of text that can be used to unlock an address that may or may not contain bitcoins. If you have a private key that unlocks an address containing 1,000 BTC, then you effectively have control of 1,000 BTC. If you have a private key that unlocks an address containing 0 BTC, then you have control of 0 BTC. The blockchain is the same for everyone but having a private key grants you ownership of that address and thus the ability to send transactions via that address.

A wallet is really just a collection of private keys. You can even ditch the computer altogether and scribble the private key on a piece of paper and those bitcoins will still be under your control.

his response was perfect.

Thank you all 

I see it like this...

You have access to a public ledger through a bitcoin address that points to the collection of bitcoins you own... to prove that you are the owner of those bitcoins or a portion of it, you are supplied with a secret key.

The bitcoin address and the secret key is linked to each other through VERY complex mathematical algorithms.

The secret key, is your proof, that you own the coins.  

Bingo. You're storing keys which allow control over some amount of btc. Ownership does not apply on the blockchain.