Editor’s note: This interview explains how the Bitcoin system is perceived today with wallet addresses. However, Satoshi Nakamoto’s original design explicitly contemplated that addresses should not be re-used and a new private-public key pair should be generated for each transaction to provide user privacy.
As a comparative newbie to wallets, I realised there were plenty of things I really didn’t understand about them. So I asked nChain’s Jack Davies (below) for help. I’ve summarised his answers to my questions, so I hope you learn as much as I did from his clear and useful explanations.
1. Where is the Bitcoin ‘in’ my wallet actually kept?
Bitcoins are kept on a public blockchain that’s maintained by a network of computers, where they are associated with addresses. An address specifies the ownership details relating to Bitcoins, rather than their location – so more like the words written on an envelope than a house in the street that they refer to.
The address includes information about the permission to control – and therefore ownership of – a particular coin (‘coin’ meaning simply an amount in Bitcoin, not necessarily a whole Bitcoin).
Your wallet contains a list of the addresses that you control. So if you have money ‘in’ a wallet, that means you have control over the coins associated with your addresses.
In essence, the wallet simply provides access to the blockchain. Your money is therefore not ‘in’ your wallet, but the wallet provides access to it – and the ability to spend it.
So where on the blockchain is your money?
Well, by analogy, if you own cash, you can keep it all over the place – in multiple locations that have no relation to each other except that you know where they are (if you’re well-organised).