If you want to buy or sell items with Bitcoin, you need to be able to send and receive your funds from a certain location, kind of like sending and receiving mail through a mailbox.
But since we’re talking about sending and receiving Bitcoins -- and not postcards -- the location where you send and receive Bitcoins is actually on the internet and represented by a long series of letters and numbers.It’s called a Bitcoin address.
What is a Bitcoin Address?
A Bitcoin address indicates the source or destination of a Bitcoin payment. Similar to sending an email, if you want to send bitcoins to your friend, you would send your bitcoins from your Bitcoin address to your friend’s Bitcoin address.
Most blockchain experts recommend generating a new Bitcoin address each time you send or receive a payment, though. This personal security measure makes it harder for people to trace where your Bitcoin funds come from and where they go.
How to Get a Bitcoin Address
To get a Bitcoin address, you first need to download a Bitcoin wallet, which is software that allows you to securely send, receive, and store Bitcoin funds in the Bitcoin network.
Bitcoin wallets also store your private key, which is essentially your Bitcoin password. The software will generate a brand new Bitcoin address for you every time you create an invoice or receive a payment request for Bitcoins too.
Mobile wallets are the most convenient wallets to access, but your wallet provider will store your key on its app or your phone, so if someone knows your phone’s passcode and accesses it, they can easily send all your funds to one of their Bitcoin addresses.
To combat this security issue, consider only letting fingerprint authentication open your mobile wallet app.
You can download mobile wallets in the app store on IOS, Android, and Windows Phone.
Then, they can go to your email account, click "forgot my password", and your email service provider will text a "change my password" code straight to their phone. This allows them to break into your email account, prompt your Bitcoin wallet provider to send a "change my password" email, and hack into your Bitcoin wallet account, stealing all your funds.
Consider telling your cell phone carrier to ask for a passcode before any of your account details can change -- it'll be nearly impossible for hackers to uncover it.
You can sign up for a web wallet on a wallet provider’s website.
Hardware wallets are like external hard drives for your Bitcoins. They’re physical, offline pieces of hardware that you can plug into your computer to buy and sell items with Bitcoin and store in a safe place when you’ve finished conducting business.
Hardware wallets are the most secure way of storing your bitcoins because they limit your funds’ exposure to the internet and potential hackers.
Here are some hardware wallets you can buy online:
Bitcoin addresses are 26-35 characters long, consist of alphabetic and numeric characters, and either begin with “1”, “3”, or “bc1”.
Currently, there are three Bitcoin address formats in use:
1. P2PKH (address starts with the number “1”)
2. P2SH (address starts with the number “3”)
3. Bech32 (address starts with “bc1”)
Bitcoin is new and exciting, but it's also relatively ambiguous, so it polarizes the general public. Its potential as a global currency exhilarates some people but terrifies others.
Bitcoin skeptics doubt the cryptocurrency is secure enough to become a global currency, but Bitcoin wallets, especially hardware wallets, are getting tougher to crack, and the one-time use of Bitcoin addresses make your transactions nearly untraceable.
Originally published Jul 26, 2018 10:42:21 AM, updated October 24 2018