🔒 4.1 How Bitcoin Ownership Works
- Public and Private Keys:
- Bitcoin ownership is defined by cryptographic key pairs:
- Public Key: A Bitcoin address that others use to send BTC to you.
- Private Key: A secret code that grants access to your Bitcoin.
- Analogy:
- Public key = email address (you share it to receive messages).
- Private key = password (you must protect it to access your account).
- Bitcoin ownership is defined by cryptographic key pairs:
- Wallets:
- Digital tools that store and manage your private keys.
- Wallet types:
- Hot wallets: Connected to the internet (more convenient but less secure).
- Cold wallets: Offline storage (more secure but less convenient).
🔑 4.2 Custodial vs. Non-Custodial Ownership
- Custodial Ownership:
- Bitcoin is stored by a third party (e.g., exchange platforms).
- You don’t hold the private keys—“not your keys, not your coins”.
- Risks:
- Counterparty risk: The exchange could be hacked or go bankrupt.
- Censorship risk: Funds could be frozen.
- Non-Custodial Ownership:
- You hold your own private keys.
- Full control over your Bitcoin.
- Requires proper security measures (e.g., backups, hardware wallets).
- ✅ Best Practice:
- Use non-custodial wallets for long-term storage.
- Only keep small amounts on exchanges for trading purposes.
🔥 4.3 Wallet Types and Security
- Hot Wallets (Online):
- Software wallets connected to the internet (e.g., mobile or desktop apps).
- Convenient for frequent transactions.
- Examples: BlueWallet, Exodus, MuunnWallet.
- 🔥 Risks: Vulnerable to hacking and malware.
- Cold Wallets (Offline):
- Hardware wallets (physical devices) that store keys offline.
- Best for long-term, secure storage.
- Examples: Trezor, Ledger, Coldcard.
- 🔒 Benefits: Highly resistant to hacks and online threats.
- Paper Wallets:
- Physical printout of your private and public keys.
- Secure but easily damaged or lost.
- Multisig Wallets:
- Require multiple keys to sign a transaction (e.g., 2-of-3 multisig).
- Enhances security by reducing reliance on a single key.
- ✅ Best Practice:
- Use hardware wallets for cold storage.
- Back up your recovery phrase (seed phrase) in a secure, offline location.
🔐 4.4 Protecting Your Bitcoin
- Seed Phrase (Recovery Phrase):
- A 12- or 24-word phrase generated by your wallet.
- Allows you to recover your funds if you lose your wallet.
- Critical: Never share your seed phrase.
- Best Security Practices:
- Use 2FA (two-factor authentication) for exchanges and wallets.
- Back up your seed phrase in multiple, secure locations.
- Never store private keys online (e.g., cloud storage).
- Consider using metal backups for seed phrases (resistant to fire and water damage).
- Common Security Threats:
- Phishing attacks: Fake websites or emails that steal keys.
- SIM-swapping: Attackers take over your phone number to bypass 2FA.
- Malware: Software that steals keys or compromises devices.
- ✅ Tip:
- Always verify wallet addresses and use trusted software.
⚙️ 4.5 Network Security – Why Bitcoin is Safe
- Proof-of-Work (PoW):
- Secures the Bitcoin network through massive computational power.
- Making fraudulent changes would require 51% of the total mining power, making it economically unfeasible.
- Decentralization:
- Tens of thousands of nodes worldwide store the full blockchain.
- No single entity controls the network.
- Irreversibility of Transactions:
- Once confirmed, Bitcoin transactions are permanent and cannot be reversed.
- This prevents chargebacks or fraud.
- Resilience Against Attacks:
- 51% attack: Even if an entity controls most mining power, altering the blockchain would be extremely costly and temporary.
- Double-spending: The network’s confirmation mechanism makes double-spending virtually impossible.
✅ Key Takeaway:
Bitcoin security relies on cryptographic ownership, self-custody of private keys, and decentralized mining power. Proper ownership practices (cold storage, seed phrase backups, and avoiding custodial risks) are essential to protect your Bitcoin.
(ChatGTP)
Leave a Reply