Thread by @SalomonCrypto

(1/19) Crypto 101: Wallets

What actually is @MetaMask? Is my $ETH inside my @Ledger? Why does everything involving crypto have to use a wallet?

A very high level discussion of #cryptography and #smartcontracts

(2/19) Do you ever wonder why this whole thing is called “Cryptocurrency?”

There’s a lot of things Satoshi gave us, but critical to everything are the properties of cryptography.

https://twitter.com/salomoncrypto/status/1522950609644654592

(3/19) Number Theory was the hardest class I’ve ever taken. Just trust me, the “Operation” section of this Wikipedia page mathematically proves this truth of cryptography:

You can create private messages between two parties over a public network.

en.wikipedia.org/wiki/RSA_(cryp…

(4/19) ELI5: Each party has a secret password that only they know. They also both have a public address.

In order to communicate securely, each person combines their password with the other’s address.

Then they trade these combinations so that both people have a copy.

(5/19) Through cryptography, we create a shared password that can be used to secure messages.

The messages can be unlocked by either side, but no other listener can unlock it.

We can mathematically prove it (we are going to skip probability and quantum for now)

(6/19) Ok so that was a basic explainer (simplifying A LOT). What’s the application to cryptocurrency?

@ethereum is The WORLD Computer. It needs a way to keep track of everyone and a way to make sure only authorized users do authorized things.

An address and a password.

https://twitter.com/salomoncrypto/status/1522950619224453121

(7/19) Every time you are taking a loan on @RariCapital or making a bribe on @VotiumProtocol, you need tell @ethereum who you are (your public address) and then prove it (sign with your private key).

(8/19) Where does a “wallet” come in?

Well reader, at this point I’m just going to go out on a limb and just say “wallet is a dumb term.”

Though I’m open to being wrong…

(9/19) Let me just explain to you how this works.

Your “wallet” never holds anything. “Holding” $USDC means that @circlepay deployed a smart contract that has a database of accounts and $USDC balances.

Buy, sell, send. Everything is just a message to that database to update.

(10/19) You send a message to that contract:

“this is my public address, I have 100 $USDC in your database. Please update my accounts to reflect sending 50 $USDC to @Tetranode. This is your public address combined with my private key so you can verify I own this address”

(11/19) No $USDC “enters” your “wallet.” No $USDC “leaves” the smart contract.

The wallet is a metaphor that represents the collection of all your accounts at all the different smart contracts around @ethereum.

Whether or not you like the term, it’s focused on this aspect.

https://twitter.com/salomoncrypto/status/1523419396017852416

(12/19) Aside…

I actually think this isn’t true with base L1 assets like $ETH. I believe that’s actually an issue and why we need $WETH.

But I’m really not sure about this. @VitalikButerin maybe you want to help out?

…back to regularly scheduled programming.

(13/19) But why don’t I like “wallet?”

When we talk about crypto wallets we are usually referring to things like @MetaMask or @Ledger.

We have specific software and hardware with passwords, it’s easy to think that these things are vaults of our money.

(14/19) They are vaults, but they don’t hold your assets… They hold your private key!

Your proof of identity and proof of authority on chain. As the world becomes increasingly more online, this will only be more true.

Think about where you are placing your proof of self.

(15/19) Hardware wallets make sure your private key never touch the internet. They generate your private key on device and it will never leave. All signing happens on device and only compiled messages are sent to an internet connected computer.

@Ledger @Trezor @gridplus

(16/19) Software wallets (hot wallets) exist as an application on your computer. They do what they can to secure your private key, but they are only as secure as your machine. If your computer is compromised so are your private keys.

@MetaMask @argentHQ @CoinbaseWallet

(17/19) Don’t worry too much about functionality. Hardware wallets sound like a pain, but most connect directly to @MetaMask and therefore web3.

Think about security and convenience. Hardware wallets are very secure. Software wallets are very convenient.

(18/19) I use both, for different reasons at different times.

You need to understand and make the decisions for yourself. Don’t take any advice, financial or otherwise, from this explainer.

https://twitter.com/salomoncrypto/status/1524485890587856897

(19/19) Last thought… the most common and most devastating loss is a socially engineered attack. Software or hardware wallets are both vulnerable. It’s on you to keep yourself safe.

I’ll leave you here. I hope you learned something cool!

tripwire.com/state-of-secur…