You may have heard the term BIP38 before, but what does it actually mean?
BIP38 is basically a standard way to encrypt a Bitcoin private key with a password. So if someone finds your encrypted key he can’t decipher it without knowing the password.
BIP stands for Bitcoin Improvement Protocol – meaning if you have an idea to make Bitcoin better you can draft it up and if it’s accepted by the community they will start using it. So BIP38 is just the 38th proposal submitted to the Bitcoin Improvement Protocol which is currently adopted by Bitcoin users for protecting their private keys.
There are 2 ways you can use BIP38. The first is to encrypt an existing private key with a password.
The second way to use BIP38 is to let someone else create a private key for you and not allow them to spend your Bitcoins. So if you buy a physical Bitcoin for example, you’ll notice they have a private key printed on them and the guy who created them knows that key. So having BIP38 allows the creation of these coins and still protect you from the seller’s ability to spend them.
Keep in mind that private keys encrypted with BIP38 will usually start with 6p instead of the usual 5j.
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