Homework on Role of Wallets - Questions

  1. Describe in short what a bitcoin wallet does.
    A bitcoin wallet does the following:
    a. Stores your private keys
    b. Creates and signs transactions
    c. Broadcasts your transactions to the network
    d. Reads the blockchain with reference to your wallet and associated transactions
    Importantly, it does not store your crypto coins.

Describe in short what a bitcoin wallet does.
It contains the users private keys used to sign transactions which are then broadcasted to the network.

  1. Describe in short what a bitcoin wallet does.
    A bitcoin wallet stores private keys and uses them to sign transactions and transmit to the network. There are different types such as a Hardware Wallet, Paper Wallet, SPV Wallet that interact with the network in different ways and therefore present different risks.
  1. Stores private keys. Creates, signs, and distributes transactions. Receives transactions.
  1. A wallet, if online, is an SPV. It connects to the full nodes to read the blockchain and send your transaction to it. The wallet only holds your private key and is used to sign transactions.
    You can add an additional layer of security by having your SPV connect to a hardware wallet to sign the transaction inside the hardware wallet, send it to the SPV and finally to the nodes.

Stores your private keys and allows you to transact on the network.

A wallet basically contain the private key pairs. When we want to send out any bitcoin, the wallet will create and sign the transaction . After which it will propagate into the network to be picked up by the miners. If successfully mined the block will be included into all blockchain nodes (wallet).

It also " listen" for any incoming transaction and updates its ledger if any.

  1. A wallet stores your private keys, no actual coin.
    It creates and signs your transactions and broadcasts it to the nodes.
    It reads the blockchain and receives the funds broadcasted to you.

A Wallet stores your private keys. When you want to perform a transaction the wallet will create and sign the transaction with your private keys and broadcast it to the network for confirmation

1- it basically does fourth things
First: it stores your private key.
Second: it signs and creates transactions.
Third: it broadcasts transactions to the network
Forth: it scans the Blockchain to tell you how much you have and wither your transactions has been sent or not.

1. Describe in short what a bitcoin wallet does.

A bitcoin wallet stores the users “private keys” (PKs). A wallet does not store or hold coins.
There are 5 types of wallet ranked by there intrinsic security from 1 through 5.

1) Paper Wallet - highly secure because their is no digital signature, but user dependent.

The paper wallet holds the users private key (PK) in paper (hard copy) format which is maintained offline, and so has no digital signature. A paper wallet is highly secure until the PK is entered into the blockchain network via a full node to initiate a transaction. At which point the security of the paper wallet is compromised because the connected device now has a digital record of the paper wallet PK and so is vulnerable to attack.

To regain the integrity of the paper wallet PK the user needs to create another PK (record another PK on a new piece of paper) to regain the security of the PK. This method of transferring funds is highly secure, but also highly inconvenient. If the paper key is lost the user is screwed. E.g. the user washes clothes his trousers and the PK is located within the trouser pocket, ahhhhg.

2) Hardware Wallet -USB device maintaining the PK, but not connected to the network

An example of a hardware (HW) wallet is a Trezor HW Wallet. This is a USB device which maintains the users PK. A hardware wallet is similar to a Simplified Payment Verification (SPV), but is used to simplify the paper wallet transaction process.

A HW wallet does not transmit or expose the PK to the blockchain network. A HW wallet simply authorizes transactions using the users PK returning the completed transaction + hidden PK for broadcast to the blockchain network to transfer funds recorded within the blockchain ledger.

3) Hosted Wallet - user wallet is maintained by a 3rd party, typically an exchange.

The 3rd party exchange (e.g. Coinbase, Binance, Britrex) maintains a record of the blockchain ledger similar to a full node plus multiple user private keys. This solution offers the user an easy methodology to interact with the blockchain ledger/network from multiple remote devices.

The user does not record or maintain their PK. Instead the exchange displays to the user, via a secure HTTPS login portal, the number and type of coins they own. On logging into the exchange the user instructs the exchange via a simplified payment verification (SPV) application (desktop pc or mobile phone) how to manage their online funds.

The SPV initiates transaction requests instructing the exchange’s cold storage wallet (cold storage wallet; which contains multiple user PK for tracking user identified coins contained within the blockchain ledger) how to initiate a blockchain ledger transaction. i.e. transfer funds from one user to another.

4) Full Node - security improved via offline hardware wallet

Contains a complete copy of the blockchain ledger, and is permanently connected to the blockchain network. Since the PK and full node are one in the same hardware is vulnerable to attack due to a malware security breach.

Full node implementation security is improved by containing the users PK offline via a hardware wallet (Trezor). Raining its security level above that of an exchange.

5) SPV; Simplified Payment Verification. Lowest level of security.

A typical SPV application is a mobile phone wallet. This is a lowest level of security because the wallet can be stolen or lost or hacked via a remote user using a WiFi or Cellular connection installing malware onto the users mobile phone.

A SPV does not contain a complete copy of the blockchain ledger due to its limited memory capacity. An SPV requires access to a full node to complete a blockchain ledger transaction.

To improve the level of security a SPV is typically used to instruct the exchange how to manager the users coins.

An SPV requires access to multiple “full nodes” to integrate the blockchain ledger to confirm the requested transaction has been completed successfully. A SPV requires access to more than one “full node” encase the connected “full node” is slow to update or is offline to ensure the SPV accurately tracks/records the blockchain ledger transaction.

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  1. stores private keys and signs transactions

Wallet stores your public and private key, which are later used to sign transactions.

Uma carteira serve para armazenar sua chave privada, serve para assinar e comunicar transações (assinar através da chave privada) e checar as demais transações da rede, indicando quantos Bitcoin voce possuí.

A bitcoin wallet stores the private and public key. Broadcasts transactios and comunicates with the block-chain. It does not hold any coins.

  1. A wallet is basically a peace of software that, by using your private key, makes it possible to sign transactions and broadcast them to the network.
  1. stores private keys, signs transactions. has information regarding your balance, and history etc

A wallet basicly holds/stores the private keys, can sign transactions with that private keys and send the signed transaction to the bitcoin network.

  1. To store private keys and sign transactions. Also to create/request a transaction and to keep track of available funds.

A bitcoin wallet creates my transaction, signs it with my private key and transmits it to the bitcoin network. In my bitcoin wallet I can see the history of my transactions, i.e. coins I have sent and received and it notifies me when I receive a transaction.

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