A bitcoin wallet doesn’t store coins in a wallet. Instead, the wallet protects the cryptographic keys that prove the ownership of a definite amount of bitcoin on the Bitcoin network.

Bitcoin operates on a system called public-key cryptography (PKC) used on blockchains to protect transactions. The system allows only people with the appropriate set of keys to access their coins.

There are two sorts of keys that are needed to own and make bitcoin transactions: A private key and a public key. Both types are strings of randomly generated symbols used to encrypt and decrypt transactions. On the bitcoin network, PKC applies mathematical functions that are easy to solve in one way and almost impossible to do it backward. 

The Bitcoin blockchain uses the one-way mathematical algorithm to generate a public key from the private key. That's impossible to regenerate the private key from the public key, so it's better not lose or forget the keys. A person also will get a public address, which is a shorter form of a person’s public key.

To make transactions, a person is required to use their private and public keys. Also, you have to add the public address of the receiver. Only that person who has the right private key can unlock or claim the transferred bitcoin.

There are different types of crypto wallets — hot, cold, online/web, paper, mobile, and desktop. Please, read our guide on wallets to go deeper into the topic. 

There is also a nice opportunity to try our SimpleHold wallet that you can have as a browser extension on Chrome, Fireworks, Opera and Brave, or a mobile app for both Android and iOS systems. 

Can bitcoin be converted to cash?

Yes, bitcoin (BTC) acts just like any asset, so it can be exchanged. There are different cryptocurrency exchanges online like Binance.US, Coinbase, Kraken, Gemini, and alike where people can do this. The exchange takes a fee for the transaction, and it differs from one to another. You need to create an account that allows you to sell bitcoins and withdraw cash. 

There is another way to cash out your bitcoins, it is a P2P exchange that could be sometimes faster and cheaper. Such platforms also allow you to stay anonymous. You can use a VPN to secure your connection and choose different payment methods: web money or gift vouchers.

So, you send your bitcoins, and the exchange holds the seller’s bitcoins. Then the seller confirms (or disputes) that you sent the money, and only after that, the exchange releases the bitcoin.

Here are some P2P exchanges you can look at: Paxful, Localbitcoins, Hodl Hodl, Binance P2P, etc. 

Closing thoughts

Bitcoin made it possible to be an independent person once we are talking about managing one’s money holdings — decentralized, digital, fast, anonymous, secure, and transparent. Thanks to Bitcoin, there appeared many other coins and tokens showing a new revolutionary way of digital economy; the whole system is developing and growing, getting better, and working on disadvantages the system can have. It’s a great step into the future that simply can’t be questioned.