I am confused with the explanation given : If I have say 3 bit coins and I send one bit coin from my cold wallet to an online wallet by import or sweep [ more confusion here !] ready to spend it …the cold wallet ” will be depleted ” Does this mean be trying to spend one coin I have lost the other two ? Would appreciate a better description perhaps with an example outlining each and every step from setting up the key, sending the bit coins, checking remaining balance [ where is it if it hasnt been ” depleted !” ? ] and maybe having to set up a new cold wallet … thanks
Yeah, it is a little confusing. This is why I recommend hardware wallets over cold wallets, as it’s a lot harder to mess up using a hardware wallet.
The problem is about how Bitcoin handles change. For example, your 3 coins in the cold wallet could exist as a single input of 3 BTC to your 1 cold wallet address… Or as 3 inputs of 1 BTC to that address. Or as 6 inputs of 0.5 BTC to that address… And so on, any combination is possible really, so long as the final product is 3 BTC.
Now when you want to send 1 BTC, then in the first example your wallet will send out 3 BTC to the destination and get 2 BTC back as change. In the last example, it would send out 2 of the 0.5 inputs and have no need for change. The problem is that this change address isn’t known to you, although it is still controlled by the private key which controls your cold wallet.
This makes paper wallets a bad choice for newcomers, in my opinion, as they require quite an in-depth understanding of Bitcoin to use safely. Hardware wallets are a lot easier and will save you from these sorts of issues.
I should have said that the change address isn’t known to you *in advance* – you can discover it later by using any blockchain explorer.
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