Starter Kit: The Private Wallet
Bitcoin purchased and now they are rotting on an exchange. The next step must be to transfer them to a private wallet to become the real owner the the Bitcoin. But how do you do that?
What is a Private Wallet?
The private wallet is comparable to the usual wallet you carry with you. The problem leaving your Bitcoin on an exchange is that actually someone unknown is the one having the wallet and you are just having an account on their website. Once the exchange is gone, you wallet is gone, too. And there is no way back. That is not what you want, is it? So, let use create you personal wallet and transfer the Bitcoin over there.
There are (honestly) hundreds of wallet softwares out there. I have tried several, but for a start in cryptos I always recommend Electrum. Since I do not want to start a crazy comparison here, I simply give you the reasons for Electrum: It is very easy to use, supports every damn computer system out there and is quite intuitive, which means less error-prone.
Creation of the Private Wallet
After downloading Electrum and installing it, I will guide you step by step through the creation of your own private wallet.
- In the first step, you will select a name of a wallet. The wallet is by the way stored in the Electrum appdata folder.
- Now select standard wallet. You can click “Next” or read my reason for the choice.
Extended info: The two-factor authentication is explained in another article and makes things too cimplicated for now. “Multi-signature Wallet” is even more complicated than the two-factor. “Watch Bitcoin address” is only showing you the content of an address. You can archieve the same by going to blockchain.info and typing in the address.
- On the next prompt, select “Create a new seed”. A seed is the true heart of your wallet: The private key.
- Now you will be shown a new seed. It is an arbitrary chain of 12 words. This is the one and only forever lasting access to your Bitcoin. With this 12 words, you can always recover your Bitoin. Remember that in worst case you PC can burn down. Thus, the seed should not be saved digitally, but offline on a paper. In case your house burns down, also leave a copy at your mum’s place.
- Have you really save the seed? Let’s have a look!
- The seed is something you should just use in emergencies. The more often you use it, the more likely it will be sniffed somehow. So, Electrum offers you to open your wallet directly without entering the seed. However, it is recommended to setup a password at least. Once the wallet is leaked and it does not have a password, you are busted. And if you choose a password, please take a more secure one than I did ;-P
- That was it! Electrum is creating your personal wallet.
- And this is how your wallet will look like when opened in Electrum (this is Windows, on OSX you have less tabs and it slightly differs):
Transfer Your Bitcoin to Your Wallet
Now that you have a private wallet, you can send Bitcoin to it. Start Electrum and go to the tab “Receive”. The image to the right depicts it. You will have an address there. Attention: The address will be renewed every once in a while; that is normal and absolutely fine. Even if you later cannot see the address you have used, it is still yours. Just keep calm and breath. Electrum will just regularly give you another new one. Your old one are forever yours. I have hidden the full address in the image, not that you use mine – though I would be grateful 😉
Since you are aware of where to send your Bitcoin now, we can go on. The address you have copied from Electrum is like your personal home address. Now you have to dispatch the post. Thence, the Bitcoin. To do so, go to the exchange or website where you have your Bitcoin. The following steps will all be very similar on every site, but in detail they slightly differ. I will explain you how to do a transfer in Poloniex. Just read through it and you will understand what to search for on your site.
Open Poloniex and go to the upper right “Balances” > “Deposits & Withdrawals”. Then scrool through the list of coins and find Bitcoin. Then click on “Withdraw”. The picture below depicts the expanded panel you will get. Bitcoins are actually primitive: You just have a receiver and an amount. Paste your Electrum wallet address (To compare to my wallet, the address starts with “1HLtkJDus…”). In the “Amount” field enter the total amount to send. All exchanges I have used so far will directly show you the fee for the transfer. You will directly see how much will be send out to your wallet. And there are no more deductions thans that! Before submitting the withdrawal, check one more time the first four and last four characters of your Bitcoin address. Since there is no validity check for addresses, better be sure. Once everything is alright, submit the withdrawal on “Withdraw”.
In my case, Poloniex will send me another E-Mail with a unique link to confirm the withdrawal. Kind of a 2FA. I must confirm the withdrawal before it is actually executed.
In a few minutes, you will receive an entry in the “History” tab in Electrum about the transaction. The transaction will take a little bit till it is confirmed by the blockchain. Electrum will show the transaction way before it is confirmed in the blockchain. No worries, that is normal. Latest after one hour the transaction should be confirmed and credited to your wallet. Sometimes the blockchain is even slower and you have to wait a bit longer.
I hope that tutorial helped you to get started with transfers in Bitcoin. Trust me, the second one will be easy peasy for you. Unfortunatly though, I want to ensure that for any faults in the transaction I cannot take resposibility.
If you have any questions or wishes for this tutorial, just let me know in the comments below! 🙂