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Important Knowledge

This section explains the foundational concepts behind Bitcoin. How the blockchain works, why keys and addresses matter, and the critical differences between exchanges and self-custody are all crucial Bitcoin traits. Master these principles to interact with Bitcoin confidently and securely.

What is the Blockchain?

The blockchain is a public ledger that documents every bitcoin transaction ever in real time.

  • Everyone can see the blockchain, but no one can edit it.

  • The blockchain ensures no one can fake transactions, double spend their coins, or undo your payments.

  • The blockchain uses layers of cryptography to prevent fraud.

  • Step by Step:

    • 1. You send Bitcoin to another wallet

    • 2. The transaction gets broadcasted to Bitcoins Network

    • 3. Bitcoin miners verify the transaction is legitimate.

    • 4. The verified transaction gets added to a new “block”

    • 5. That block joins an existing chain of blocks (a new block is added to the blockchain every ~10 minutes)

    • 6. The transaction is finished after 1-6 confirmations

  • Link to a blockchain website: 

 

Public Keys vs. Private Keys

Your bitcoin address is your “public key”

  • Your address will be a long chain of random numbers and letters or a QR code. (oftentimes your wallet has both methods as an address)

  • This address allows for people to send bitcoin to you.

  • Sharing it is completely safe. Think of it as a saftey deposit box number

  • Your “private key” should be kept private and not shared with anyone who you wouldn't want accessing your bitcoin.

  • Your private key is typically hidden in your wallet app and is referred to as a “seed phrase”

  • Your seed phrase is 12 or 24 random words that act as your password to your wallet

  • If someone obtained access to your seed phrase they would be able to access your Bitcoin in your wallet.

  • Once you feel comfortable using Bitcoin and are familiar with the workings and structure, we highly suggest moving your Bitcoin off exchanges and into your own wallet (discussed further under the “Protecting your Bitcoin” page)

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Bitcoin Exchange vs Bitcoin Wallet:

An exchange is a place you buy, sell, and trade Bitcoin (and other cryptocurrencies). The exchange itself holds your private keys for you

  • This is very similar to keeping your money in a bank.

  • This method of storing your Bitcoin is easy, good for beginners, but less secure.

  • Think of it as renting an apartment. It is easy to move in and out as you please but the landlord (the exchanges) ultimately controls your space.

    • A Bitcoin wallet acts as a personal safe for your Bitcoin

    • You hold your private keys (seed phrase) yourself

      • This makes your Bitcoin more secure but also your responsibility if you lose your seed phrase.

      • Think of it as owning a house. You hold the deed (your private keys) and no one can evict or sell your home without your permission. 

    • Wallets are not meant for buying/selling bitcoin. Instead they are great for storing Bitcoin or sending it to someone else.

    • There are two types of Bitcoin wallets: Hot wallets and cold wallets

      • Our “advanced” tab explains in more depth the key qualities of the different Bitcoin wallets and storage methods. Ready to learn more?​

    • Our tip: Start with your Bitcoin on an exchange, then gradually move your funds to your own cold wallet.

Got the basics down? Learn advanced Bitcoin topics here!

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