The Indestructible Glass Safe — Bitcoin Addresses and Private Keys
Mike Talks About Bitcoin — Post #12
Bitcoins are stored in addresses on the blockchain.
You can think of a bitcoin address as a large, indestructible, transparent, glass safe. The safe has 1 slot to deposit coins and 1 combination lock. Anyone can put bitcoins into the safe and see what is inside, but without the combo the safe is impenetrable.
How do you know which safe is yours? The address is on the front of the safe. It is public information, so people know where to send bitcoins.
How do you pick a safe?
Here’s the fun part. You don’t get to pick out which safe you want. You only get to pick the combo.
The combo points to the safe, but the safe will NOT lead to the combo. This is called a one-way function.
The combo is the only way to unlock the safe and spend the bitcoins; this means that anyone with the combo can open the safe.
How do you pick a combo?
However you want! You can even choose your favorite combo “password” or “password123”, but I would strongly recommend against that.
In bitcoin, the combos are called private keys. These keys must be secret, and they must be unique. If someone else also chooses the same private key, i.e. “password”, then they will have access to the funds. When creating a private key, it is essential that it is random to ensure a unique and private address.
Vocabulary:
Bitcoin Address: A series of numbers and letters pointing to the location bitcoins are stored on the blockchain.
Private Keys: A random series of numbers and letters which points to the address and allows bitcoins at the corresponding address to be spent.
New keys/addresses can be generated here: https://www.bitaddress.org
This is post #12. The others are located here.
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Sources:
Mastering Bitcoin By: Andres M. Antonopoulos
