Foreword

The digitisation of money has changed the way we conceive and manage our finances.

The very online services provided by banks are an example of this paradigm shift: with only your username and password you have access to your bank account, however, you no longer physically have money deposited.
Cryptocurrencies, as “pure” virtual currency, are the completion of this conceptual change: it is no longer the possession, but rather the access to your money that makes you the owner.

 

Buy bitcoin = buy a piece of code

When you buy bitcoin or any cryptocurrency, you are not directly buying a certain amount of virtual currency.
You are buying a portion of that currency’s code.

Imagine Bitcoin as the DNA code. If you could buy a piece of DNA code, technically you wouldn’t be able to take a piece of it home and turn it into a physical object. The DNA remains a unique structure, a sequence of chromosomes linked together. What you can buy is the right to property on a portion of the DNA code.

Buying bitcoin means, therefore, buying the ownership rights on a portion of the Bitcoin code. Depending on how many bitcoins you buy, you take ownership of a larger or smaller portion of that code.

 

All you need

To buy, store and use your bitcoins and altcoins you need:

  • a public address: it works exactly like a bank IBAN when you have to make a transfer. It is the address from which you can send or receive cryptocurrencies.
  • a private key: it is the password that gives you access to your cryptocurrencies, stored on the public address.
  • a wallet: is the software that allows you to perform operations of transfer, purchase and sale of cryptocurrencies.

 

The most important thing for the security of your bitcoins

The Private Key

The security of your cryptoccurrencies is entirely entrusted to your private key. You can think of it as a kind of password that gives you access to bitcoins or other cryptocurrencies you own. To be more precise, it gives you access to the portion of Bitcoin code (or other cryptocurrency) you own.

It is very important to keep your private key in a safe place, such as a safe, to avoid losing it or being robbed of it.

Technically, the private key is a sophisticated form of encryption and consists of a unique alphanumeric sequence like this:

Kx7yCjB1hJQfqBvnyFfheeHEWU9PSHnB1yaDZwx8Dety7hPz7Xjk

The Public Key

Each private key is associated with a public address (or public key) that works exactly like a bank IBAN, or an address where your cryptocurrencies are deposited and stored.

The public address also looks like a unique alphanumeric sequence:

13nnpVrAKc545E6h6SEiSBptXYcqtgpDfg

It is called public address because on the blockchain it is visible to everyone and you can give it to any user who wants to send you cryptocurrencies.
In cryptocurrency transactions, the public addresses “dialogue” with each other, just like the bank IBANs. It is not necessary to provide additional personal data, such as name and surname, to receive a certain amount of cryptocurrency on your public address.
Anonymity in the crypto transfer system is one of the most interesting and debated aspects because if it is true that it protects our privacy, on the other hand, it has given way to different criminal organizations to launder money through cryptocurrencies.

Wallet

A wallet for cryptocurrency is a digital tool that stores private and public keys and interacts with various blockchains to allow users to send and receive digital currency and monitor their balance. If you want to buy, sell or trade Bitcoin or any other cryptocurrency, you need to have a digital wallet.

Private, Public Key and the Blockchain

It is important to point out that each cryptocurrency has its own blockchain, i.e. the underlying technology without which the whole system could not exist.

If, for example, you have 4 different cryptocurrencies, you necessarily have 4 private keys and 4 public addresses. Let’s say you bought 3 Bitcoins, 1 Ethereum, 1 Tether and 6 Ripple.

You will then have:

  • 1 Private key associated with 1 public address that gives you access to the 3 Bitcoins (BTC) on the Bitcoin blockchain.
  • 1 Private key associated with 1 public address that gives you access to 1 Ethereum (ETH) on the Ethereum blockchain.
  • 1 Private key associated with 1 public address that gives you access to 1 Tether (USDT) on the Tether blockchain.
  • 1 Private key associated with 1 public address that gives you access to the 6 Ripples (XRP) on the Ripple blockchain.

You can also split your bitcoins or any other cryptocurrency over multiple public addresses. For example, you could choose to keep 2 bitcoins on one public address and the third bitcoin on another. In this case, you will have:

  • 1 Private key associated with 1 public address that gives you access to the 2 bitcoins (BTC) on the Bitcoin blockchain.
  • 1 Private key associated with 1 public address that gives you access to 1 bitcoin (BTC) on the Bitcoin blockchain.
  • 1 Private key associated with 1 public address that gives you access to 1 Ethereum (ETH) on the Ethereum blockchain.
  • 1 Private key associated with 1 public address that gives you access to 1 Tether (USDT) on the Tether blockchain.
  • 1 Private key associated with 1 public address that gives you access to the 6 Ripple (XRP) on the Ripple blockchain.