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How does Bitcoin Cash wallet work?

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Avatar for Telesfor
Written by   1210
1 year ago (Last updated: 9 months ago)
Topics: Bitcoin Cash


Many new Bitcoin Cash users are not sure, or do not know how a Bitcoin Cash wallet works.  Some even have a completely wrong idea about it.  They think that their Bitcoin Cash is stored in the wallet on their smartphone or PC.  But this is not correct.

Your Bitcoin Cash is not stored in the wallet, but in the blockchain and mempool on more than a thousand computers called nodes around the world. How to run such a node I described here

Blockchain is a list of all Bitcoin Cash transactions that are grouped into blocks and chained together.  Each newly created block is linked to the last created block.  Mempool is a waiting room for transactions that are not yet included in a block.  On average, 10 blocks are created per hour.

Why do I see my Bitcoin Cash in my wallet and can I spend it if it is not stored there?

To understand this, you must first know how a Bitcoin Cash transaction works.

On your wallet (whether it is an offline wallet like bitcoin.com or Trust Wallet or an online wallet like read.cash Wallet) is stored your Bitcoin Cash address and associated keys - private key and public key.  The public key can be calculated by any other wallet that knows your Bitcoin Cash address.  Your private key is only known by your wallet. 

When a person A sends 1 BCH to your Bitcoin Cash address, his wallet creates a transaction file using his private key, which belongs to his Bitcoin Cash address, and your public key belongs to your Bitcoin Cash address and sends it to a node. The node verifies the transaction (the node knows both Bitcoin Cash addresses and both public keys) and if the transaction file is correct, it writes it to a waiting room (called mempool) and sends the transaction to other nodes it is connected to. The other nodes do the same. The transaction in mempool is lightning fast on all nodes in the network. 

Your wallet is connected to one of these nodes. As soon as this node detects an incoming transaction for you, it immediately notifies you to receive 1 BCH from the address of the person A (some wallets do not inform if the transaction is in mempool, but only if it is in a block. In the case of BTC wallets it must be so, because a BTC transaction that is in the mempool is not always recorded in a block und you can't spend it. I suspect that these BCH wallets that do not show the mempool transactions are derived from BTC wallets). Now your wallet can issue your BCH by creating a new transaction.  It does this just like person A described above.

Your private key gives you access to your Bitcoin Cash. You should keep it secret and not give it to anyone. From your private key everyone can calculate your public key and your Bitcoin Cash address (it is not possible the other way round).

What does a private key look like?  Here you can see an example private key:

5HpHagT65TZzG1PH3CSu63k8DbpvD8s5ip4nEB3kEsreAnchuDf

There is a website that lists all Bitcoin Cash private keys. You can see it there:

https://allkeys.cash

What? A list of all the private keys?  Aren't they secret?  If I know his private key, do I not have access to BCH of an address?  Yeah, you can try.  If you're lucky, you'll find a private key that derives a Bitcoin Cash address that has an amount of unspent coins.  But you must be damn lucky.

There are 1.461.501.637.330.902.918.203.684.832.716.283.019.655.932.542.976 Bitcoin Cash addresses. The most powerful computer in the world would have to take billions of years to find an address with an amount.

As you can see the private key is a bit complicated and not easy to remember. That's why they developers introduced  a seed. Seed that is a sequence of 12 words that is much easier to remember. From these words (and a derivation path), your wallet can create your private key again and again.  

You can import the same seed into different wallets and all of these wallets will have access to your Bitcoin Cash. I wrote here how to import your seed from read.cash into bitcoin.com wallet. 

Bitcoin Cash has a huge advantage compared to conventional currencies. You must either keep fiat currencies in a bank account or als banknotes in your wallet. Your bank can go bankrupt, the government can limit or freeze payments, your conventional wallet can be stolen or you can lose it. You cannot take large amounts of cash across the border in many countries.

If you want to have access to your BCH you just have to remember your seed. That's all. You can import it into a wallet and make transactions anytime and anywhere. Nobody can take your Bitcoin Cash away from you.

But if you do not know your seed or private key, your BCH does not belong to you, but to the person or company who knows (or store) it. This could be for example an exchange, which keeps your BCH for you. If the exchange goes bankrupt or is hacked, your BCH is lost.

Therefore when I buy BCH, I always transfer it to my wallet, for which I know my seed, derivation path and private key.To make the wallet more secure against hacks, it can be secured with hardware such as Trezor.io .

Remember your seed (and derivation path) well and don't give it to anyone.

If you want to know why you sometimes have to pay higher transaction fees than normal on the Bitcoin Cash network, read my another article.

How does Bitcoin Cash work you can read here.

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Avatar for Telesfor
Written by   1210
1 year ago (Last updated: 9 months ago)
Topics: Bitcoin Cash
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Comments

This was a really informative article! Thanks for sending it my way over on Noise. Learned a lot from this post alone. Gonna read your post about the derivation paths next

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1 year ago

I'm glad you enjoyed it and thank you for the generous tip.

$ 0.00
1 year ago

Thanks I really learned some lessons day by day just by reading and understanding your articles about Bitcoin Cash and the whole blockchain.

$ 0.00
1 year ago

Thanks I really learned some lessons day by day just by reading and understanding your articles about Bitcoin Cash and the whole blockchain.

I am pleased

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1 year ago

Thanks for this sir, I have know little knowledge about Bitcoin cash. This is very informative to me. 😊

$ 0.01
1 year ago

Wow amazing article.I subscribe you please subscribe back.

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1 year ago

How interesting is this! But, what is most interesting to me is the plastic card for Bitcoins and other cryptocurrencies. I am looking for it for months and couldn't find anything.

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1 year ago

I'm new to cryptocurrency universe. I just acquainted with it last year. My first wallet was XRP. It has lower value compared to Bitcoin Cash BCH. I also have BAT token. I get it from Brave browser. At first I really Don't understand what is cryptocurrency and tokens that are associated to it. What I know is it is an online currency. What I don't understand is What commodities or goods backed Cryptocurrency. For example the Dollar is backed by Gold and Oil, Economy . While in my country Philippines our Peso is backed by Gold, Economy and regulated by Central Bank. My question Sir is what commodities backing up Cryptocurrency?

Until this August I was invited by a friend here in Read Cash. I enjoying staying and sharing here. Thanks Sir for sharing your knowledge about how Bitcoin Cash BCH transactions works. I learned a lot today. Thanks again Sir !

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1 year ago

You're wrong, dollars are not backed by gold or oil, that is a common misconception. I will write an article about it in a day's time and explain the differences between crypto currencies like Bitcoin Cash and fiat currencies like USD or PHP.

Update: here is the link to the article

https://read.cash/@Telesfor/what-is-the-difference-between-bitcoin-cash-and-fiat-currency-like-usd-or-php-3d9368ec

$ 0.01
1 year ago

I think it is a common knowledge Sir that Fiat Currency around the world was backed by gold. You cant print bills/banknotes if it has no corresponding gold. I will wait for that article of yours Sir. I want to learn more about this topic and cryptocurrency.

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1 year ago

Dollar and PHP are fiat money

"Fiat money is a currency (a medium of exchange) established as money, often by government regulation, but that does not have intrinsic value (value independent of the nominal value, such as a precious metal might have). Fiat money does not have use value"

https://en.m.wikipedia.org/wiki/Fiat_money

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1 year ago

But the currency value also depends on the economy of a certain country. For example the American Dollar has greater value than Hongkong or Singaporean Dollar.

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1 year ago

The value of a currency doesn't matter. Any country can determine it as it wants. For example, a Jordanian dinar is worth 1.4 USD. Does that mean the Jordanian economy is stronger than the US economy?

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1 year ago

If any country can determine the value of its currency then it is possible that the Philippine Government can adjust the value of Peso to P1=$1 as they want to? Sir

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1 year ago

Yes, they can, but they won't, because everyone would immediately exchange PHP for USD and buy goods from abroad. All Filipino goods would suddenly be very expensive and nobody would buy them. All Filipino companies would go bankrupt immediately.

But they can do it differently. They can issue a new peso and peg the new peso to dollars. A new peso would then e.g. 48.5 PHP cost. You would have to exchange old pesos for new pesos in the bank. Then the new peso would be worth 1 USD. All goods would then cost less new peso, but of course people would then earn much less new peso. Many countries have already done this or similar. Most of the time they only cross out a few zeros in the new currency, so e.g. 1 new peso = 100 old peso This process is called denomination.

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1 year ago

Wow you are really an expert I think. How about Currency manipulation in which China was accused by USA.?

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1 year ago

Wow you are really an expert I think.

I read a lot and that's why I believe in Bitcoin Cash.

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1 year ago

USA accuses China of doing it the other way around. You have to imagine it that way. The government of the Philippines sets the exchange rate at 1: 100. If a Filipino company sells PHP 500 worth of goods in the US today, the goods costs $ 10 today. If the government sets the exchange rate to 1: 100, the goods will only cost $ 5. The competing same US product still costs $ 10. Which goods is the customer buying?

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1 year ago

Oh I see. Economics is really hard you know. Hahaha. So money is like a commodity or goods too. Buying the Dollar using the Peso.

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1 year ago

Yes, money is also a commodity because you can buy and sell it. But it is a commodity with no intrinsic value.

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1 year ago

What do you mean by intrinsic? It is like Gold,Silver has intrinsic value but money don't have.?

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1 year ago

Here is the definition. But it is getting very financial.

https://en.m.wikipedia.org/wiki/Intrinsic_value_(finance)

Very, very simply one can say that currency like PHP has no intrinsic value because the government can declare it worthless by law. For example, if you have a car, the car always has intrinsic value. It can be taken away from you, but then that doesn't change the value of the car. The invalidate money is immediately worthless. This has happened many times in history.

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1 year ago

Very interesting. Philippine Congress can change the currency from Peso into Dollar or Yen and declare peso as worthless. Hmmm. But car has depreciation value too depending on the years it was used. Hahaha. Were now discussing Finances and Accounting.

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1 year ago

Yes it is. That is why many people buy houses, gold and other things like Cryptocurrencies, because they are afraid that the money will one day be worth nothing.

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1 year ago

Why the value of Bitcoin Cash or other cryptocurrency changes. What factors affects its value?

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1 year ago

Right now the price is being driven by speculation. This is the case with all cryptocurrencies. When Bitcoin Cash hits mass adoption, its value will be determined by usage. It is people who will give value to Bitcoin Cash, not governments. In my opinion, Bitcoin Cash is the only cryptocurrency that can and will function as a universal currency worldwide.

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1 year ago

But Sir what if the government will try to regulate cryptocurrency? What if they penalize those business who accept cryptocurrency as mode of payment.?

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1 year ago

That is not out impossibl.USA government has already banned gold ownership once. It didn't help. The government can prohibit a lot, but it cannot invalidate Bitcoin Cash because Bitcoin Cash is not issued by the government. Government can ban coins.ph, but not local.bitcoin.com

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1 year ago

Still there's a risk in owning cryptocurrency if the government decided to use its power to regulate cryptocurrency.

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1 year ago

As long as you own your seed, the government cannot expropriate you. They can't take your BCH away. The government can ban exchanges, but not local.bitcoin.com. The government can only make it difficult for you. Coins.ph can go broke ,your bitcoin.com wallet can't.

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1 year ago

In that case Sir My cryptocurrency will be useless?

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1 year ago

Did gold become useless (worthless) when the US government banned it? You will always be able to use Bitcoin Cash. The government has no technical means to make it impossible for you. The government must turn off the internet.

The government can make your PHP worthless. It can forbid coins.ph. But it can't make your Bitcoin Cash worthless, it can't take your seed away from you. They can not ban your wallet. There are many open source wallets. You can always use your BCH when you have internet.

That is the real strength of Bitcoin Cash. The current price fluctuations are irrelevant. When mass adoption begins, there is no going back.

Lots of people are working on it.

https://flipstarter.bitcoincash.site/

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1 year ago

Now I learned a lot from you. When I transfer my BCH from here to my coins.ph I will always convert it to peso immediately. I never see the potential of cryptocurrency. I never thought of investing it or wait for the time comes that the price will increase. I learned a lot from you today Sir.

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1 year ago

This "common knowledge" is wrong. It hasn't been like that for almost 50 years. Many people just don't know. For more read here:

https://en.m.wikipedia.org/wiki/Gold_standard

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1 year ago

Now you see what I intended on my recent article, majority of us here don't know what most of the things you wrote about here function, we are hearing about them for the first time. More lessons like this will be good to many of us here. We want to know more about bitcoin cash, how to hold and invest it safely. Thank you for this information.

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1 year ago

I try my best and just try to write so that it understands everything. However, I see from the comments that some people didn't understand it (maybe they didn't read it carefully enough?) But that's what I've already written to you, learning is an active process of the learner. I cannot learn for you. I can only help you to learn.

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1 year ago

Thank you for the tip 😀.

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1 year ago

I am using coins.ph. Thank you for the information 😊

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1 year ago

Is it possible to export the seed or private key from the wallet?

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1 year ago

Yes sir you can export the seed from your coins.ph wallet. You need to convert your bch into peso, in that way you can export it

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1 year ago

That's not what I mean. If you convert your BCH into pesos, you lose your BCH and get pesos for that. If you export your seed from the read.cash wallet or bitcoin.com wallet, you will not lose your BCH. You still have as much BCH as before. The seed is 12 words. Can you display the 12 words in coins.ph wallet?

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1 year ago

I believe you are knowedgeable about bch wallets, and the best person that can help me with my wallet problem : I accidentally created 3 wallets on read.cash, my first wallet has bch funds while the third wallet has no funds but it is currently my wallet that will receive my bch from read.cash. can I use my first wallet with funds again, if yes how will I do it? Your response is highly appreciated thanks in advance!

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1 year ago

What I suspect is that you have logged into read.cash with several browsers (or in incognito mode) and have not imported your seed. In this case read.cash has created different addresses for you on each browser. I think you need to login with the browser that was used to create the first wallet to get access to this funds. If you want to use your current browser, send your funds from the old wallet (after you logged in in your old browser) to your new address in the cutrent browser.

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1 year ago

Gud day is it possible to use my previous bch read.cash wallet, the the one with funds coz the current bch read.cash I'm using has 0 funds? Thanks

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1 year ago

I hope I understand you well. You have to use your old wallet and send your funds to the new wallet on new browser.

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1 year ago

How come there are so many addresses I mean, the world's population isn't up to 8 billion so if everyone was to own ten addresses there's still a whole lot left.

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1 year ago

The number of addresses is intentionally so high so that 2 people do not get the same address. When you create a new wallet, the address is generated randomly. But because there are so many possible addresses the probability that you will get an address that already exists is close to zero. You have to imagine it like this. There are many grains of sand on earth, each grain of sand has a random number. These are the possible addresses. Some grains of sand already belong to people but how do you want to find them? But that is not all. You have to imagine that the whole earth is a world full of grains of sand. And all the planets in our galaxy too, and in all the galaxies. And that is still not enough. There are more Bitcoin Cash addresses than that. That's why when you create a new address, you have no chance of getting an address that is already taken.

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1 year ago

Yeah that's why they always say keep your private key safe or secret otherwise others can see your transactions

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1 year ago

Informative. I will save it if anyone ever asks/likes to know how or what (they can translate it themselves). Most of all I like the fact this is one of the few articles written in clear, understandable language for newbies. 👍💕

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1 year ago

Thanks for the recognition.

$ 0.00
1 year ago

Very informative for new users ! Great article 😀😀

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1 year ago

ok good very good your article, but I'm missing something, but where do I open my bch wallet? give me the answer, greetings

$ 0.00
1 year ago

Your BCH wallet is in integrated in read.cash. You open it when you log in to read cash.

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1 year ago

Thnx for the information.

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1 year ago

I am new user.This article will help me a lot.Thank you very much.

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1 year ago

Keep sharing

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1 year ago

i am new here also.

$ 0.00
1 year ago

Amazing

$ 0.00
1 year ago

I feel very good looking at your posts. I like looking at the writings you write so beautifully

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1 year ago

Thanks for this informative article 😍 💕

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1 year ago

Thank you very much for your kind information..... I didn't know about it clearly before....Take my heartiest thanks for publishing this useful information

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1 year ago

For newbie like me with 0 crypto know ledge this is a big help thank you so much, but it is very much appreciated if you explain it on lay man's term, thanks!

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1 year ago

As I'm a new user, this article helped me to know many things. Thanks alot for publishing this informative article ♥️

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1 year ago

Thanks for the information sir.

$ 0.00
1 year ago

Thanks for detailed explain👍

$ 0.00
1 year ago

Thank you for the tip😀.

$ 0.00
1 year ago

Wonderful article as always. I am sure many newbies will benefit from this.

$ 0.00
1 year ago

This is a helpful article especially to the new users of this site who don't have any idea about that wallet. Thank you sir. 💞

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1 year ago

I'm using Coins.ph to save my money. Thanks for explaining this to everyone especially to the newbies.

$ 0.00
1 year ago

Same here, I also use coins.ph

$ 0.00
1 year ago

Its cool right? Its actually my first time to use such an app

$ 0.00
1 year ago

Yeah, it is very convenient and I could cash out on any local banks which is great and by far the best <3

$ 0.00
1 year ago

Can you export your seed or private key from your coins.ph wallet?

$ 0.00
1 year ago

Wooah thank you for this article. Very helpful for uss. I Currently using coins ph wallet.

$ 0.00
1 year ago

Finally I understand what public and private keys are. It's amazing how everything can be so open and still be concealed at the same time.

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1 year ago

To be honest I had a problem syncing with Bitcoin.wallet a few days ago ,so balance was not loading.Now it is all good and working.Really cool looking interface with convenient method set there to send BCH from one to another

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1 year ago

Yey! Finally you have a new article 😍 Thank you. You give us all readers another information about that kind of wallet. This is very helpful.

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1 year ago

Thank you sir. This is a very important knowledge to acquire in terms of Bitcoin Cash. I will save your article sir. 😊 Currently I am using coins.ph I can easily convert it to PHP, btc, xrp, eth, but when I am needing BCH again I will just convert my PHP into BCH.

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1 year ago

Thanks for this, I will save this one in case I forgot something. Before I used coins.ph but now I store my BCH in Bitcoin.com for more safety 😊

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1 year ago

I use Bitcoin cash but I have not enough knowledge about it. Thanks for sharing this. I can gain many knowledge from it.☺

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1 year ago

Thank you very much sir for explain it in details.

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1 year ago

I used bitcoin wallet too. And there I stored my bch from readcash, I already generate my seed phrase too so I can access my wallet even I didn't visit my readcash wallet.

$ 0.00
1 year ago

Welcome back to the hood Mr.Telesfor

$ 0.00
1 year ago

Nice

$ 0.00
1 year ago

Nice

$ 0.00
1 year ago

After a long time I am seeing your article. Thanks for your informative article. Remembering seed is important,,,

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1 year ago

Thanks for this explanation

$ 0.00
1 year ago

At first I am that naive when it comes to BCH on how it will be transfer to a wallet but luckily I was guided by my friend that knows it well. This article of yours is helpful for someone who doesn't know well about how BCH wallet works.

$ 0.00
1 year ago

Thanks for your information sir . It is great article . Thank you dear sir for this explanation..

$ 0.00
1 year ago

I literary had no idea about bitcoin wallet.Thanks for your informations.Well explained👍

$ 0.00
1 year ago

It's been really long since i saw your update @Telesfor , thanks for the broad and easily understandable explanation on BCH wallet. Thanks so much and by the way, the picture you used as your leade image looks very tantalizing, 5$ for me won't be too bad😚. I look forward to hearing from you

$ 0.00
1 year ago

Thanks for the article

$ 0.00
1 year ago

Nice

$ 0.00
1 year ago

Thanks for the info

$ 0.00
1 year ago

Nice

$ 0.00
1 year ago

I really learnt from this article

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1 year ago