Crypto-Wallets: A Technical Perspective Svetlin Nakov @ OpenFest 2018 - https://www.openfest.org/2018/en/ Sofia, 4 November 2018 In this talk the speaker explains the concepts of crypto-wallets used by the blockchain developers to securely keep the private keys controlling the blockchain addresses and crypto-assets. The different wallet types (brain, paper, desktop, mobile, online, hardware) will be introduced and how to build and interact with wallets, sign and send blockchain transactions are demonstrated. The speaker explains the basic concepts and will give examples how to use and interact with keystores (holding a single ECC-based private key) and hierarchical deterministic wallets (HD wallets), which use mnemonic phrases with key-derivation based on the BIP39 and the BIP44 standards to keep multiple private keys. All attendees are invited to create their own crypto-wallet and to get some testing crypto-coins (Ethereum Ropsten Testnet ethers – ETHt) and to send a few payment transactions on the Testnet. All concepts are demonstrated with live examples in JavaScript: creating a simple wallet, encrypting and saving it; creating a new random HD wallet and creating an HD wallet from mnemonic phrase, along with deriving private keys. Learn more at: http://www.nakov.com/blog/2018/11/04/crypto-wallets-a-technical-perspective-nakov-at-openfest-2018/

1. 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. 2
 Software engineer, trainer, entrepreneur,
PhD, author of 13 books, blockchain expert
 3 successful tech educational initiatives (100,000+ students):
About Svetlin Nakov

3. 3
 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

4. 4
Book "Practical Cryptography for Developers"
GitHub:
https://github.com
/nakov/practical-
cryptography-for-
developers-book
Official site:
https://cryptobook.
nakov.com

5. Table of Contents
5
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

6. 6
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

7. 7
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
timestamp block_hash
all_transactions_hash
transaction #1 hash
transaction #2 hash
transaction #3 hash
…
Block #1
nonceprev_hash
timestamp block_hash
all_transactions_hash
transaction #1 hash
transaction #2 hash
transaction #3 hash
…
Block #2
prev_hash nonce

8. 8
 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?

9. 9
 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

10. Practice
Play with Jaxx Wallet and Ethereum

11. 11
Install the Jaxx Wallet
https://jaxx.io
Jaxx Wallet
Desktop / Mobile

12. 12
Enable the Ethereum Testnet (ETHt)

13. http://sli.do
#nakov
13
Share Your Wallet Address to Get ETHt

14. 14
Send ETHt to the People Around You

15. Request test ethers (ETHt) from the Faucets
 http://tiny.cc/ropsten-faucet
 https://faucet.metamask.io
 https://faucet.ropsten.be
 http://faucet.bitfwd.xyz
15
Ethereum Testnet Faucets

16. 16
 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

17. 17
Simple Keystores: Encrypted Private Keys
myetherwallet.com

18. 18
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

19. https://github.com/ethers-io/ethers.js
19
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);
});

20. 20
Simple Keystore from Private Key in JS
let ethers = require('ethers');
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)));

21. 21
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

22. 22
 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)

23. 23
HD Wallets in JavaScript: From Mnemonics
let ethers = require('ethers');
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}`);
}

24. 24
HD Wallets in JavaScript: New HD Wallet
let ethers = require('ethers');
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}`);
}

25. ?
Crypto-Wallets: A Technical Perspective
https://softuni.org

26. License
 This course (slides, examples, demos, videos, homework, etc.)
is licensed under the "Creative Commons Attribution-
NonCommercial-ShareAlike 4.0 International" license
26

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