To start using Bitcoin, you need a Bitcoin wallet (and some bitcoins from buy.coingate.com). Read on for steps to install and setup Electrum, or use this guide as a reference for installing another Software Wallet.
Electrum is a great Bitcoin wallet for both beginners and advanced users. It is a wallet perfectly suited for daily use of Bitcoin: making purchases online and transferring funds between people. Although it has a simple interface, Electrum is one of the most secure wallets out there. For both of these reasons, we recommend it to all of our users, and we also want to help you setup Electrum correctly. So continue reading for step-by-step instructions and tips to install, secure and setup Electrum, or any other software wallet for that matter. Meanwhile, for an introduction to receiving the first transaction to your wallet, scroll to the bottom of this post.
Installing and Securing Electrum
Download the latest version of Electrum from https://electrum.org, install, and run it. You will now undergo the wallet creation process. Use the default options in the first two screens and select Auto connect and Standard wallet (for a more advanced setup with increased security, choose Wallet with two-factor authentication).
Next, Electrum will generate your wallet backup seed – a sequence of 12 words, which allows you to restore your wallet if something unforseen happens to your device. You MUST keep the backup seed secure, as you would keep your bank login credentials. Also, we recommend printing the sequence or writing it down by hand, and storing it safely.
To make sure that you wrote down the backup seed correctly, you will be asked to re-enter the 12 word sequence.
Next, you will be able to choose a password to encrypt your wallet. This password will help protect your bitcoins if someone gains access to your computer or copies your wallet file. This password will NOT be required to restore the wallet from the backup seed, though.
After choosing the password, the main Electrum window will open – you are done with setting up. Yet we recommend going to Tools > Preferences > Appearance and changing the Base unit to BTC. This will make Electrum display the transaction amount in bitcoins, whereas the default setting is mBTC (microbitcoins), which can be confusing for new users.
Receiving a Transaction
To receive bitcoins, open the Receive tab. Receiving address is your Bitcoin address and it is something like your bank account number. Thus, if you are buying bitcoins by bank transfer or with your credit card from buy.coingate.com, or simply wish to receive bitcoins from a person, you should indicate this address for payment.
Upon receiving a payment, Electrum will display a notification. Althouh the risk of Bitcoin double-spends is extremely low, if you do not personally know the person sending you bitcoins, allow the Bitcoin network to confirm the transaction at least once (6 confirmations is often considered the most secure threshold).
Unlike your permanent bank account number, you will be generated a new Bitcoin address each time you want to receive a transaction, This, essentially, increases your anonymity and improves security, because it is much more difficult for someone to track your received transactions.
It may seem that this makes your life more difficult; however, it does not. You do not really have to care about all these different addresses – you can use the same addresses for receiving payments every time. This may be beneficial, for example, when you wish to see how much money in total you received from a specific person over a longer period of time. In spite of the number of different addresses you use, you will always see your total balance at the bottom left corner of Electrum.