Most people have at the very least heard of the term Bitcoin. They know it’s this thing called cryptocurrency but again, have no idea what it is.
Well, here is a free extract from the DMR (Digital Money Revolution) course to help you understand it a little more.
A Bitcoin wallet is a piece of software you use to communicate with the Bitcoin network and tell it when you want to send and receive transactions. The best way to understand a Bitcoin wallet is by comparing it to email.
Once you have set up an email address you need some kind of software to allow you to send and receive emails to that address. Now, this software may be an app on your phone, it may be an app on your laptop or it could even be an app you log into online.
With email, you enter the username and password for your email address into the app and that’s how the Internet knows it’s really you that is sending and receive emails to that address. Now, of course, you tell everyone your email address and you have to do that in order for anyone to send you a message. But just because someone knows your email address, that doesn’t allow them to send email from that address. If they could that would be bad because then they could send emails pretending to be you and cause all kinds of problems.
In order to be allowed to send email from a particular email address, you have to know the password. If someone finds out your email password then there’s nothing stopping them from logging in to your email app and sending messages. This is very similar to how a Bitcoin wallet works. Every Bitcoin account has two elements to it. One is called your public address, which is like your email address, and one is called your private key, which is like your password.
So just like email, you can give anyone your Bitcoin public address and then anyone, anywhere in the world can send you some Bitcoin. They don’t need to know anything about you. All they need is that public address and they can send money to you. Your Bitcoin private key, on the other hand, is the one thing you must protect. It’s called your private key for a reason because you should never reveal this to anyone. If someone gets your email password, that’s bad because they can start sending emails from your address, but that’s not quite as bad as someone getting your Bitcoin private key because then they can steal all of your Bitcoins by sending them somewhere else. And just like email, once a Bitcoin transaction has been sent, it’s a one-way trip. The only way to get it back would be for the person you sent it to voluntarily send it back.
Bitcoin literally works like digital cash. Once you’ve handed it over, the Bitcoin belongs to that other person. And the same goes for when you receive Bitcoin. Once someone sends it to you, it’s yours and no one can take it from you. The only way they could do that is if they knew your private key. And of course, now you know never to give this to anyone.