Update 3_3_Setting_Up_Your_Wallet.md

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@ -15,13 +15,17 @@ Note that this address begins with an "n" (or sometimes an "m"). This signifies
> **TESTNET vs MAINNET:** The equivalent mainnet address would start with a 1.
_What is a Bitcoin address?_ A Bitcoin address is literally where you receive money. It's like an email address, but for funds. However unlike an email address, a Bitcoin address should be considered a single-use token: use it to receive funds just _once_. When you want to receive funds from someone else, generate a new address. This is suggested in large part to improve your privacy. The whole blockchain is immutable, which means that explorers can look at long chains of transactions over time. This can make it possibly to statistically figure out who you and your contacts are, no matter how careful you are. However, if you keep reusing the same address, then it becomes pretty easy to see who you.
Take careful note of the address. You'll need to give it to whomever will be sending you funds.
However a Bitcoin address is also something else: a public key (or more precisely, the 160-bit has of a public key). The public key (or address) allows you to receive money, while an associated private key lets you spend money.
_What is a Bitcoin address?_ A Bitcoin address is literally where you receive money. It's like an email address, but for funds. However unlike an email address, a Bitcoin address should be considered a single-use token: use it to receive funds just _once_. When you want to receive funds from someone else or at some other time, generate a new address. This is suggested in large part to improve your privacy. The whole blockchain is immutable, which means that explorers can look at long chains of transactions over time, making it possible to statistically determine who you and your contacts are, no matter how careful you are. However, if you keep reusing the same address, then this becomes even easier.
_What is a Bitcoin wallet?_ By creating your first Bitcoin address, you've also begun to fill in your Bitcoin wallet. More precisely, you've begun to fill the `wallet.dat` file in your ~/.bitcoin/testnet3 directory. The `wallet.dat` file contains a considerable amount of data about prefeences and transactions, but most importantly, it contains all of the keypairs that you create on your local instance of Bitcoin: both the public key (which is to say the address, which you give people so that you can receive coins) and the private key (which is what you use to spend those coins). For the most part, you won't have to worry about that private key: `bitcoind` will use it as appropriate. However, this makes the `wallet.dat` file extremely important: if you lose it, you lose your private keys, and if you lose your private keys, you lose your funds!
A Bitcoin address is also something else: a public key (or more precisely, the 160-bit hash of a public key). The public key (or address) allows you to receive money, while an associated private key lets you spend that money.
With a single address in hand, you could jump straight to the next section, and begin receiving funds. However, before we get there, we're going to talk about a few other wallet commands that you might want to use in the future.
_What is a P2PKH address?_ You may also see this sort of address referred to as a Pay to PubKey Hash (P2PKH) address. That's the standard type of Bitcoin address that allows funds to be immediately sent to one person. It's largely used in contrast to more complex payment mechanisms like Pay to Script Hash (P2SH).
_What is a Bitcoin wallet?_ By creating your first Bitcoin address, you've also begun to fill in your Bitcoin wallet. More precisely, you've begun to fill the `wallet.dat` file in your ~/.bitcoin/testnet3 directory. The `wallet.dat` file contains data about preferences and transactions, but more importantly it contains all of the keypairs that you create: both the public key (which is to say the address that you give to people so that you can receive funds) and the private key (which is what you use to spend those coins). For the most part, you won't have to worry about that private key: `bitcoind` will use it as appropriate. However, this makes the `wallet.dat` file extremely important: if you lose it, you lose your private keys, and if you lose your private keys, you lose your funds!
With a single address in hand, you could jump straight to the next section and begin receiving funds. However, before we get there, we're going to talk about a few other wallet commands that you might want to use in the future.
## Optional: Sign a Message
@ -35,7 +39,7 @@ Another person can then use the `bitcoin-cli verifymessage` command to verify th
$ bitcoin-cli verifymessage "n4cqjJE6fqcmeWpftygwPoKMMDva6BpyHf" "H3yMBZaFeSmG2HgnH38dImzZAwAQADcOiMKTC1fryoV6Y93BelqzDMTCqNcFoik86E8qHa6o3FCmTsxWD7Wa5YY=" "Hello, World"
true
```
If they all match up, then the other person knows that he can safely transfer funds to the person who signed the message by sending to the address:.
If they all match up, then the other person knows that he can safely transfer funds to the person who signed the message by sending to the address.
If some black hat was making up signatures, this would instead produce a negative result:
```
@ -56,7 +60,7 @@ $ bitcoin-cli importwallet backup.dat
## Optional: View Your Private Keys
Sometimes, you might want to see the private keys associated with your address. Perhaps you want to be able to sign a message or spend a coin froma different machine.
Sometimes, you might want to see the private keys associated with your address. Perhaps you want to be able to sign a message or spend a coin froma different machine. Perhaps you just want to backup certain important keys.
To look at _all_ the keys in your wallet, type `bitcoin-cli dumpwallet mywallet.txt`. This will create a mywallet.txt file in ~/.bitcoin/testnet3 with a long list of private keys, addresses, and other information. Mind you, you'd never want to put this data out in a plain text file on a Bitcoin setup with real funds!
@ -65,8 +69,10 @@ More likely, you just want to look at the private key associated with a specific
$ bitcoin-cli dumpprivkey "n4cqjJE6fqcmeWpftygwPoKMMDva6BpyHf"
cW4s4MdW7BkUmqiKgYzSJdmvnzq8QDrf6gszPMC7eLmfcdoRHtHh
```
If you think it's a pain to have to constantly retype (or recopy) that public address, as we have in this section, we agree. It's also prone to errors, a topic that we'll address in the very next section.
You can then save that key somewhere safe.
You've been typing that Bitcoin address you generated a _lot_, while you were signing messages and now dumping keys. If you think it's a pain, we agree. It's also prone to errors, a topic that we'll address in the very next section.
## Summary: Setting Up Your Wallet
You need to create an address to receive funds. You can also do lots more, like dumping that address' private key or using it to sign messages. All of this is stored in a wallet, which you can back up. But really, creating that address is _all_ you need to do in order to receive Bitcoin funds.
You need to create an address to receive funds. Your address is stored in a wallet, which you can back up. You can also do lots more with an address, like dumping its private key or using it to sign messages. But really, creating that address is _all_ you need to do in order to receive Bitcoin funds.