In this article I will show you how you can create and start using your own Bitcoin wallet, which will give you the ability to send and receive bitcoins to friends, family, online purchasing or to just buying a cup of coffee from your local shop. I will also show you how you can encrypt and backup your wallet. Please note that this is meant as a basic introduction to Bitcoin and creating your Bitcoin wallet, and not an advanced look at the currency. I will add some useful links at the bottom of this article that will appeal to users of all abilities. Please also note that the instructions below can be applied to other wallets such as, Litecoin, Dogecoin or Quarkcoin.
The amount of online stores and in the local high street that are now starting to accept bitcoins as payment is increasing at a rapid rate, mainly spurred on by it fast transactions speeds and little to non transaction fees. As I was writing this article, Malwarebytes announced that they were also including Bitcoin as a payment option, which is great news.
This Bitcoin wallet is just one of many ways in which you are able to send and receive bitcoins, (BTC) and doesn’t require your computer to be on and the wallet software loaded in order to receive funds. Other ways of using Bitcoin for purchases is in the use of online wallets, like those where you are able to buy and sell bitcoins or exchange them for other altcoins like Litecoin or Dogecoin. Mobile wallets are now being used more and more by people as well, giving them the ability to be able to carry around some BTC and buy things whenever they want, by simply scanning a QR code to complete the transaction. Any funds that are sent to your wallet address (in this case I am referring to your Bitcoin-Qt wallet) when your computer is turned off will show up in your wallet the next time you torn the computer on and open the wallet allowing the Block Chain to fully load and sync with the Bitcoin network. A Block Chain is a transaction database shared by all nodes using the Bitcoin protocol. A full copy of the Block Chain will contain the entire transaction history of every transaction every made with bitcoin.
Please note that I do not recommend that people use online wallets to store coins for any longer than they need to due to security purposes. If you wish to trade some of your coins for another currency, (be it fiat or another altcoin) then make sure that once you have completed your trade/s you send the coins back to your desktop wallet address again.
So what exactly is Bitcoin and how does it work?
Bitcoin is a free open-source, fully decentralised digital currency that was first introduced in 2009 to the open-source community by Satoshi Nakamoto (real name unverified) and has been going from strength-to-strength ever since with many other altcoins also being created. It allows people to instantly send and receive money in a secure manner, often with little or no transaction fees. Below is an animated video via WeUseCoins that gives you a great little introduction to the currency.
One of the best articles that I have read that can explain just exactly how the Bitcoin protocol actually works, is written by Michael Nielsen of DDI, so if you really want a deeper insight into all things Bitcoin, then check out his article here. It can get a little heavy at times, but it will give you a decent understanding of how it all started and developed.
Note: Bitcoin (capital B) refers to the protocol and bitcoin (lowercase b) refers to the coins
Downloading your first Bitcoin wallet
Before you begin, it is advised to make sure that your computer is free of malware or other infections, so take this opportunity to run a scan with your Anti-virus software
There are various types of Bitcoin wallets that you can choose from, including mobile wallets, paper wallets, web wallets and Desktop wallets. Today though I will be showing you how to create a desktop wallet using the official Bitcoin-Qt client. The Bitcoin-Qt client supports Windows, Mac OS X and Linux, and can be downloaded here. Simply select the one that is suitable for your computer’s operating system and download/install it. For the purposes of this article I will be installing the Windows version.
When you first install the Bitcoin-Qt client, you may receive a warning from your Firewall, asking you if you trust the application to be allowed through. Simply hit Allow access.
Once you have allowed the program through, it will start to sync with the Bitcoin network and download the Block Chain. Please note that this can take quite a long time (sometimes up to 24hrs) as it downloads and stores the entire history of Bitcoin transactions. As of this writing, the Block Chain takes up 15.9GB of space alone on my system, and will increase as more transactions are made around the world. The important Bitcoin data is stored in your Roaming folder, but to access this you will have to have Show hidden, files, folders or drives enabled on your computer. To do this is simple, just go to your Folders option in Control Panel and check the Show hidden, files, folders or drives under the View tab.
Once you have that enabled, you can find the folders here:-
As I said earlier, the amount of time that it can take for the initial downloading of the Block Chain will vary depending on the speed of your computer and your network connection. In my case it took about 10 hours to download the entire Block Chain which was 262 weeks behind.
Once you have completed the sync for your Bitcoin client, you can start to use it and a unique address for your new wallet will have been created. However, before you go sending or receiving money. you must first encrypt your wallet. This functionality is built-in to the client, so the process is very straight forward.
Please note that this is not a mandatory requirement for using the software, but is highly advisable as you will be storing your coins here.
How to encrypt your Bitcoin wallet
Once the sync has completely finished, and before you add any coins to your wallet, head to the Settings tab at the top and select Encrypt Wallet.
Now choose a good passphrase to use, preferably with uppercase and lowercase letters, as well as numbers and symbols. Try to make this at least 12 characters long as a minimum. It is also very important that you make a note of this passphrase somewhere secure because if you forget it in the future and you have coins in the wallet, you won’t be able to access them again, so they will be lost. You will also need to enter this passphrase every time you want to transfer coins out of your wallet.
Once you are happy with your new passphrase, hit OK.
You will then be given a warning explaining that should you forget your passphrase, you will lose all of the bitcoins contained within that wallet. (hence it is a good idea to make a note of it) Hit Yes to confirm you understand this.
Finally you will get a notification window letting you know that in order for the encryption process to complete, the program will have to close, and any previous backups of your wallet file (wallet.dat) will need to be replaced with a new backup. We haven’t done a backup as yet, so we will do this next. Click OK to let the program close and complete the encryption. If you want to change the passphrase in the future then you can do so easily by going Settings>Change Passphrase and follow the prompts.
How to back up your Bitcoin wallet
Now we have successfully encrypted our new Bitcoin wallet, we will make our first backup. This is something that will get very used to, and is something I do every time I add money to my wallet. This way, if you get your computer stolen, the hard drive dies or you reformat, then you will have an up to date backup of your wallet. The file that we will be backing up is the wallet.dat file and there are a couple of ways to do this. The first way we will look at is to back it up using the built-in backup functionality of the Bitcoin-Qt software
To start the client up again do, Start>Bitcoin and let it load. It will automatically begin to load the Block Chain and start verifying it.
Once that has finished (should only take a few seconds or so) the main client window will show. You can also see that the wallet is properly encrypted as the encryption option (Settings>Encrypt Wallet) is grayed out. Now to backup the wallet go File>Backup Wallet
After selecting Backup Wallet, it will ask you where you want to store the backup file and what to call it. Give it a name that like Bitcoin Wallet Backup 5th Feb 2014 (that way you will know when it was backed up) and save it to your desktop or wherever is easier for you.
Once you hit Save you will see a balloon notification that the wallet has been backed up.
Now copy the wallet backup file somewhere safe, like a USB stick that will be stored somewhere (not on the computer) secure, as this will be the only way you will be able to recover your wallet should something go wrong.
The other way to backup up your Bitcoin wallet, is to do so manually. Before you do this, make sure that the wallet(Bitcoin-Qt program) is closed and then head to:
By default, the Appdata folder will be hidden on your computer, so to access this follow the instructions that I wrote above earlier in the article. As you can see from the screenshot above the backup file for your Bitcoin wallet is called wallet.dat. That is the file that you need to make a copy of and store safely somewhere, and name it accordingly so that you don’t get it confused with other wallet backups you may have for other currencies. I wouldn’t advise keeping a copy of it on your computer, because if the computer gets stolen or the HDD dies, then you won’t be able to recover your wallet.
If you do ever have to use this backup file after reformatting your system or wish to use the wallet on another computer; you must ensure that the wallet is shut down first, then head to the Roaming folder in Appdata and replace the existing wallet.dat file with your latest backup file.
Sending BTC from your wallet to another wallet
Sending and receiving coins to and from your wallet is a very simple thing to do and only takes a few seconds to complete. In this example I am sending a small amount of BTC over to my wallet on my Nexus 5, so that I can buy a coffee or something when I am out and about.
To send some coins, select the Send icon at the top. In this window you will need to know the address of the wallet that you are sending funds to. Addresses can be quite long, so it’s best to copy & paste the address in rather than type it out and get it wrong. If this is the first time you have ever sent money from your wallet, then you won’t have a record of previous transactions. However if you have, then the address will be in your wallet’s address book which can be found opposite the “Pay To’ section at the top indicated by the small red square. Give the address a label, so if you have to send to it again, you will remember what it is, and also input the amount you wish to send.
Showing addresses in your wallet’s address book
Once you hit Send, you will be prompted to input your passphrase. (remember that we encrypted the wallet earlier) Enter your passphrase and hit OK
Next you will get a confirmation windows asking if you are sure and the amount/wallet destination.
Finally you will be prompted to pay a tiny transaction fee of 0.0001 BTC, which equates to 0.05 pence. (USD$0.081) More on Transaction Fees here.
Once this have been sent, you will see a confirmation balloon on your desktop
If you are going to start buying BTC via online exchanges like BitBargain or LocalBitcoins for example, or just want to have an address in which people can pay for services that you offer, then you will need to know the address of your desktop wallet so that any BTC will make it back to your wallet safely and quickly. You are also able to generate a unique QR Code here as well which is great for placing on posters, web sites for donation purposes or any other way you can think of. To generate a QR Code for your wallets address, simply highlight the wallet and select Show QR Code. Here you can set a specific price for payment or donation by checking the Request Payment box and entering an amount, or leave it blank to let people pay/donate what they want. Give it a label name (if you haven’t already) and message as well. Then hit Save As, and it will save the QR Code as a PNG file, ready to print or place on-line somewhere.
Here is one I created for this article. Feel free to send tiny amounts to if you want to test your wallet, or simply make a donation towards my next cup of coffee 🙂
TechFleece BTC Address: 1ACMgCdzbX9Wf5SmB5C7hrHFQpVPRx
To find your address and get funds sent to it, select the Receive button at the top. This time I am going to be sending some BTC back from my Nexus 5 wallet to my desktop wallet. I’ll do an article showing the Mobile version later as it is a great way to be able to pay for certain goods when you are on the go.
Once money is sent to your wallet, you will be notified by a balloon notification.
You can also see any money that has been sent to your wallet by checking under the Transactions tab or in the main Overview tab. Note that you will need 6 confirmations in the Block Chain before the BTC that you have received becomes yours. This can take anywhere between 5-10 mins depending on the network.
Showing Overview of wallet
Finally, if you are looking for a great place in which to add up all of your various coins and convert to fiat, then check out this new site created by devs Rhian Lewis and Bruce Thomas, over at CountMyCrypto.com. Here is an example of a few altcoins and their current exchange values converted to fiat.
The tool also will remember your totals, so next time you add more coins, you can easily see what you already have.
Well, that concludes this very basic look at creating and using your first Bitcoin wallet, so I hope that it has been of some use to you. Don’t forget though, to always keep an up to date backup of your wallets address.
Have fun and welcome to Bitcoin.
- Bitcoin community on reddit – Best place for discussing all things BTC as well as some of the latest things happening in the world of BTC
- Current Price of BTC to USD/GBP/EUR/AUD/SEK (Gathered from multiple Bitcoin markets, and averaged by trade volume)
- BitBargain.co.uk (Great place for UK users to purchase or sell bitcoin and Litecoin)
- LocalBitcoin (another great place for UK people to buy and sell bitcoin)
- Official Bitcoin Site
- Original PDF Submission to the Open Source Community by Satoshi Nakamoto
- Bitcoin Charts – Real-time quotes from all major Bitcoin exchanges.
- Blockchain.info – Data and statistics from the Bitcoin network.
- Kraken – Great place for secure bitcoin trading.
- CoinDesk – Great resource for everything happening in the world of Bitcoin
- HaveLock Investments – If you are wanting to start buying shares in companies that are based on Bitcoin, then you can buy shares here in BTC. Very simple to use.