Bitcoin users create wallets with multiple Bitcoin addresses through personal software, exchanges, websites, etc., and use these wallets to transact Bitcoin.

A Bitcoin address is a randomly generated string of 26 to 35 alphanumeric characters, starting with 1 or 3, such as “1YoURbEATcoiN99MYWaLLetiDaDdRess72.” However, certain confusing characters like 0, I, O, l (zero, uppercase letter “I,” uppercase letter “O,” lowercase letter “l”) are not used.

The private key required for Bitcoin transactions is a 51-character string of alphanumeric characters. There are two main methods for depositing Bitcoin: sending Bitcoin to a textual address or transferring via QR code.

No personal information such as name, phone number, or email is required to create a wallet. Users can create up to 156 sextillion wallets, ensuring an abundance of addresses even if used globally. To put this into perspective, assuming a global population of 10 billion, each person could create 100,000 wallets without running out of addresses.

Creating a Bitcoin Wallet

To store Bitcoin, one needs to create a wallet. There are three main methods to do so:

1. Full Node Wallet: This involves turning one’s computer into a part of the Bitcoin blockchain network to verify and transmit transactions as well as utilize the wallet functionality embedded in the software. While contributing to a safer Bitcoin network and offering the advantage of no third-party involvement, this method requires leaving the computer always on and occupies significant blockchain storage space, hence less popular among individuals.
2. Lite Wallet: Also known as a lightweight wallet, this method downloads only relevant parts of the blockchain network, avoiding the need to download all blocks. It utilizes remote servers for transaction relay, consuming fewer resources and not requiring the computer to remain continuously on. Electrum is a notable software for this method.
3. Web Wallet: The most convenient but less secure method, web wallets allow access through an ID and password instead of complex private keys. However, entrusting all fund management to the providing company makes it less secure. Examples include accounts on various exchanges, as well as apps like Blockchain.info and Coinomi. Most exchanges operate hot wallets without providing private keys, potentially leading to loss in case of hacking.

After creating a wallet, users receive a wallet address and a private key. The wallet address serves as an account number for sending and receiving Bitcoin, while the private key acts as a password, granting access to transfer Bitcoin elsewhere. Hence, proper management of the private key is crucial, and it’s advisable to keep a record of it on paper in case of emergencies.

Inter-Wallet Transactions

Transferring Bitcoin between wallets is termed a transaction, which can take from a few minutes to over 10 hours. Due to Bitcoin’s digital nature, transactions undergo verification to prevent copying or tampering, which can lead to varying confirmation times.

To expedite transactions, users can opt to pay higher fees. Miners prioritize transactions with higher fees, resulting in faster processing. While fees are optional, not paying them might prolong or even prevent confirmation, making it advisable to pay a reasonable fee. Most software wallets suggest appropriate fees based on network conditions. Additionally, paying fees helps defend the Bitcoin network against denial-of-service (DoS) attacks by discouraging excessive low-fee transactions.