Crypto Wallets: A Technical Perspective (Nakov at OpenFest 2018)

Crypto-Wallets:
A Technical Perspective
Wallets, Keystores, HD Wallets,
Technical Standards (BIP39, BIP32,
BIP44), Mnemonics, JS Examples
Software University (SoftUni)
https://softuni.org
Svetlin Nakov
Blockchain Engineer
and Technical Trainer crypto
wallet

2
 Software engineer, trainer, entrepreneur,
PhD, author of 13 books, blockchain expert
 3 successful tech educational initiatives (100,000+ students):
About Svetlin Nakov

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 Technical advisor @ LockChain / LockTrip: https://locktrip.com
 Raised ~ 10.000 ETH in token sale (Sep-Nov 2017)
 Currently LOC token holders book hotels @ 20-30% better price
 Head of blockchain education (Jan-June 2018) @ Academy
School of Blockchain: https://academytoken.com
 Raised ~ 48M USD in token sale (Jan-Apr 2018)
 Tech advisor for blockchain crypto startups:
 Tokenize Exchange, Bountie, Weidex, IRIS Payments Solutions,
Aeternity Ventures
Nakov – Blockchain & Crypto Projects

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Book "Practical Cryptography for Developers"
GitHub:
https://github.com
/nakov/practical-
cryptography-for-
developers-book
Official site:
https://cryptobook.
nakov.com

Table of Contents
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1. Public Blockchains: Nano Introduction
2. Blockchain Wallets: Types, Functions, Concepts
3. Practice: Play with the Jaxx Wallet on the Ropsten Testnet
4. Simple Keystores: Encrypted Private Keys
5. Simple Keystores: JS Code Examples and Live Demo
6. HD Wallets: Mnemonics (BIP39), HD Wallets (BIP32, BIP44)
7. HD Wallets: JS Code Examples and Live Demo

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Public Blockchains: Nano Introduction
Distributed ledger
Peer-to-Peer
network
Nodes hold
ledger of facts +
history of updates
Decentralized
(no owner)
Secure
Transactions are
verified by the
entire network
Immutable

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Blockchain == Chain of Data Blocks
Demo: https://etherscan.io
timestamp block_hash
all_transactions_hash
transaction #1 hash
transaction #2 hash
transaction #3 hash
…
Block #0 (genesis block)
prev_hash nonce
transaction #1 hash
transaction #2 hash
transaction #3 hash
…
Block #1
nonceprev_hash
transaction #1 hash
transaction #2 hash
transaction #3 hash
…
Block #2
prev_hash nonce

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 Crypto wallet == software that stores private keys along with their
respective blockchain addresses
 Enables users to send and receive crypto currency / tokens
 Communicates with the blockchain network (through API or by
running a blockchain node)
 Signs transactions and sends them to the blockchain network
What is a Cryptocurrency Wallet?

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 Mobile wallet (mobile app)
 Desktop wallet (desktop app)
 Web-based wallet (web site)
 Hardware-based wallet
(USB stick, e.g. Ledger, Trezor)
 Paper wallet (private key
printed on a sheet of paper)
Types of Crypto Wallets

Practice
Play with Jaxx Wallet and Ethereum

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Install the Jaxx Wallet
https://jaxx.io
Jaxx Wallet
Desktop / Mobile

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Enable the Ethereum Testnet (ETHt)

http://sli.do
#nakov
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Share Your Wallet Address to Get ETHt

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Send ETHt to the People Around You

Request test ethers (ETHt) from the Faucets
 http://tiny.cc/ropsten-faucet
 https://faucet.metamask.io
 https://faucet.ropsten.be
 http://faucet.bitfwd.xyz
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Ethereum Testnet Faucets

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 Simple keystores
 Example: myetherwallet.com
 Keep a simple ECC private key, password protected
 Similar to OpenSSH and OpenSSL PEM keystores (see PKCS#8)
 HD wallets
 Example: https://iancoleman.io/bip39
 Hierarchical-deterministic (HD) wallet
 Keep a mnemonic phrase (12 or 24 words)
 Derive many private keys from the mnemonic
Simple Keystores vs. HD Wallets

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Simple Keystores: Encrypted Private Keys
myetherwallet.com

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JSON / UTC Keystore File – Example
{ "version": 3, "id": "…", "address": "2a90ef17a50f7e99387…c07fc",
"crypto": {
"ciphertext": "fa3315e31cba71df…2cd1", // the encrypted private key
"cipher": "aes-128-ctr", // AES, 128-bit encryption, CTR mode
"cipherparams": { "iv": "08c3f2ba1c…f6" }, // random initial vector
"kdf": "scrypt", "kdfparams": {
"dklen": 32, // key length (256-bit key for AES encryption)
"salt": "d48231c94b90c03018bf9f4…a1e0", // random-generated salt
"n": 1024, // iterations count (CPU + memory cost factor)
"r": 8, // block size (affects CPU + memory)
"p": 1 // parallelization factor (threads count)
},
"mac": "b0ee3cd7e0564acea…49e3" // msg integrity / auth key
} } Learn more at: https://github.com/ethers-io/ethers.js/blob/master/src.ts/utils/secret-storage.ts#L289

https://github.com/ethers-io/ethers.js
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Creating a Simple Keystore in JavaScript
npm install --save ethers
let ethers = require('ethers');
let newWallet = ethers.Wallet.createRandom();
console.log("Address: " + newWallet.address);
console.log("Private key: " + newWallet.privateKey);
newWallet.encrypt('P@SS~12345a').then(walletJSON => {
console.log("Encrypted wallet JSON:", walletJSON);
});

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Simple Keystore from Private Key in JS
let privKey =
"0x0e210eff4fc77ff086d81d646c94af42ec5b1bbaf3f1d525f5bf5b82af7056da";
let existingWallet = new ethers.Wallet(privKey);
console.log("Address: " + existingWallet.address);
// Address: 0xe25ACB5AaE29c38DABdc13Ea41177Aba1191D323
const provider =
ethers.providers.getDefaultProvider('ropsten');
provider.getBalance(existingWallet.address).then(balance =>
console.log('Balance:', ethers.utils.formatEther(balance)));

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Mnemonics and HD Wallets (BIP39, BIP44)
 HD wallets keep a securely generated random seed
 And use a hierarchical deterministic (HD) key-derivation (see BIP-32)
 The seed (root key) can be represented as 12 or 24 words, e.g.
 Each word comes from a wordlist of 2048 words  1 word == 11 bits
 24 words  256-bit entropy  512-bits seed (see BIP-39)
 All private keys + addresses are derived from the seed (see BIP-44)
 See https://iancoleman.io/bip39 to understand the idea in practice
force moon book duck idle best sad net pelican deal dog close

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 BIP-39 – Mnemonic Code for Generating Deterministic Keys
 BIP-32 – Hierarchical Deterministic Wallets (for Bitcoin)
 Seed  BIP32 extended private key  multiple private keys
 BIP-44 – Multi-Account Hierarchy for Deterministic Wallets
 Seed + coin type + account  BIP44 account extended private
key  multiple private keys
The BIP39, BIP32 and BIP44 Standards
seed = PKBDF2-HMAC-SHA-512(passwd = mnemonic_phrase,
salt = "mnemonic" + mnemonic_password,
iterations = 2014, keyLength = 512)

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HD Wallets in JavaScript: From Mnemonics
let mnemonic = "summer silent settle explain cigar print
drift genius quarter smart subway humble";
let hdWallet = ethers.HDNode.fromMnemonic(mnemonic);
for (let index=0; index<5; index++) {
let key = hdWallet.derivePath(`m/44'/60'/0'/0/${index}`);
console.log(`Private key #${index}: ${key.privateKey}`);
}

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HD Wallets in JavaScript: New HD Wallet
let rnd256Bits = ethers.utils.randomBytes(256 / 8);
let mnemonics = ethers.HDNode.entropyToMnemonic(rnd256Bits);
let hdWallet = ethers.HDNode.fromMnemonic(mnemonics);
console.log("Wallet mnemonics:", mnemonics);
console.log("Wallet private key:", hdWallet.privateKey);
for (let index=0; index<5; index++) {
let key = hdWallet.derivePath(`m/44'/60'/0'/0/${index}`);
console.log(`Private key #${index}: ${key.privateKey}`);
}

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Crypto-Wallets: A Technical Perspective
https://softuni.org

License
 This course (slides, examples, demos, videos, homework, etc.)
is licensed under the "Creative Commons Attribution-
NonCommercial-ShareAlike 4.0 International" license
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 Software University Foundation
 softuni.foundation
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 Software University Forums
 forum.softuni.bg

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