230601 Omocast on Crypto 003 Interface, wallets and key pairs -

The speaker recaps the attributes of a properly formed cryptocurrency or blockchain. They explain the importance of choosing a web browser or a dedicated app for interfacing with the internet and the crypto ledger. They discuss the concept of public and private keys and the need to ensure the security of the private key. They explain the different types of wallets (cold, warm, and hot) and their level of contactability from the internet. The speaker emphasizes the importance of understanding the advantages and disadvantages of the crypto system and the responsibility that comes with controlling one's private key. They mention Bitcoin as the proof of concept for cryptocurrencies but highlight its limitations. They introduce the XRPL (XRP Ledger) as a faster and cheaper alternative. They mention the XUMM app as a warm wallet for interfacing with the XRPL. The speaker briefly explains the process of creating an account and the importance of securely storing the seed phrase. They conclude Welcome back for round 3. Quick recap, last we covered the attributes of a properly formed cryptocurrency or blockchain has to be safe, secure, decentralized, disintermediated, immutable, unchangeable once it's in set in stone and permissionless of course. And we also thought about where we are in that chain of tech protocol, ecosystem interface and adoption and indeed we're almost at the adoption phase, you're almost ready to become a crypto millionaire but first we need to figure out how you are going to actually use this thing, how you're going to interface with it. So in terms of the interface to the Internet, most people think that it's just the web browser, they seem to think that the Google is the Internet, they got a question I'll ask the Google, that's not the case at all but nevertheless as with most functions on the Internet as I said in our episode 1, the functions of cryptocurrency have been shall we say absorbed into the web browsers, the various ones that are available as an extension and I'd suggest if you're going to use a web browser it has its issues but use Brave or Firefox, something privacy respecting or at worst Chrome or Edge. There's also a dedicated app will act as your interface to the Internet to the crypto ledger but before we get to that I just want to give you again another parallel with the physical world. When we use these interfaces we're going to create a wallet or an account on a blockchain on a ledger and it's going to have two numbers I'm sure if I asked you you could answer me, they are the public key and the private key and they're linked together mathematically so that if I know the private key I can always find the public key but if I know the public key I cannot possibly find the private key. Now the key management we talk about and this is we're just about to come to, it's important that you if you want to be the only person in control of the private key you make sure that that is you and that private key again is a big long number and for the crypto ledger a four-digit pin just doesn't cut it, it's just not good enough. However if the idea of self-custodying your private key is a bit much for you maybe we'll look to one of the banks or something because I mean they're already if I can say it dehumanizing, closing branches and so on and I'm quite sure that eventually they will pivot to providing what we call custodial services so that you'll have a login an app to the bank and the bank will then manage your crypto send and receive your crypto for you but again the problem that is they are then in control of your crypto. Anyway those numbers are so long and complex that you couldn't possibly recall them and so we had to find a way to record and to use them and again they're really really long to make them really really secure and once again into the physical world there is a tension between convenience and security and if I could use your front door at home as an analogy if you left your door open all the time you could walk in and in and out anytime you like no problem if you close the door it means when you come to the door with an armload of groceries you gotta reach down open turn the knob open the door and walk in if you have a lock on it you have to insert the key turn the knob push the door open walk in same you put a deadlock another lock on it or whatever so you can see that with each layer of convenience being removed so you get an increase in your security so these numbers we're talking about this private key in particular is very long and very complex and so we need some other way other than us memorizing it or writing it down because it's so big you couldn't even copy it out accurately so we have a couple of different ways of recording and applying them and we classify them as cold warm or hot wallets and that refers to how much how easily they're contactable from the Internet so a cold wallet would be the original sort of storage and that was where we just used to print that number but we'd convert it to a QR code those little square codes with dots on them we convert them to a QR code on a piece of paper and keep that that was completely disconnected from the Internet completely impossible to hack the only time I was exposed to the Internet was when you used to show it to a camera to sign or to authorize a transfer of funds or assets from your wallet another type of cold wallet is a hardware device like a USB dongle there's a number around traces ledges and so on all they are little hardware devices that plug in to the side of you into the USB port into the side of your computer and they will keep control of your hard part of your private key another one is your phone and we'd call that a warm wallet because your phone will have an app on it that you have to unlock so there is another layer of security in there before you get to your private key but it is on your phone and it's permanently connected and then of course there's the web browser so for the entire time that your web browser has got access to your private key and your web browser is open that is accessible therefore hackable from the net just things you've got to keep in mind and again I'll say to you your private key gives you absolute control over your crypto wallet you're the only one that can send funds from it with same as with gremlins with absolute power comes absolute responsibility I'm not trying to scare you but this is a fundamental principle because you are going to put quite possibly a significant proportion of your wealth or your assets on to the ledger and it's controlled with that private key so again not your keys not your crypto have I said it enough yet and in the same way that banks normally provide security and they will replace your funds if they're lost or they're stolen with crypto there is no one to blame if your funds are stolen in other words you've lost control your private key or you misplace them perhaps you send them to the wrong account you're trying to do a funds transfer on a on a crypto ledger to someone and you send it to the wrong public key then once they're gone they're gone it's on the blockchain it's immutable you might be able to contact the person and if they're of you know good heart they may well send them back does happen but there's a good chance that they want again I'm not trying to scare you I'm just to make you aware of the advantages and disadvantages of this wonderful new system anyway so we're down to the stage now where we kind of understand the interface and we're going to think about getting on to a particular blockchain and before everyone always says well you mean Bitcoin and I mean no and so I guess this is about the right time to explain why Bitcoin was I call it the granddad or at least the proof of concept of cryptos it means that it was the first time that the protocol was created for a crypto ledger and it worked the problem was I consider it to be a bit of the Model T without being harsh on it it just has a few issues it's quite expensive to operate the blockchain because it uses a consensus protocol we talked about keeping all the various versions of the ledger around the world in sync they've got to be in consensus and the protocol they use for that is called proof of work and it means you need lots and lots of computer power it's also a bit slow it takes a little while to to have a transaction get onto onto the blockchain and also it can't do many transactions very fast so if we really want to replace all the point-to-point wallet-to-wallet transactions in the world we need something a lot faster so there was some Bitcoin engineers in the old days who went away with recognize these problems went away got a clean sheet of paper and started again they came up with the thing called the XRPL the XRP ledger and it has all the correct properties of a cryptocurrency it's decentralized it's disintermediated it's trustless permissionless safe secure it is extremely fast every block is under four seconds and it's extremely cheap fractions and I mean fractions of a cent to make any transaction so it's got all the right attributes we wanted but the thing that is different about it and there's only XRP and one other blockchain called Stellar which uses a different sort of consensus protocol and it is called there'll be a little test at the end federated byzantine agreement just kidding it's simply a way of keeping all the versions of the ledger around the world and all the different nodes in sync it's a consensus protocol so having said that the XRPL is slightly because of its consensus protocol but everything else about it is just a pretty standard blockchain you get what we call Bitcoin maxis and a theory of maxis and so on people argue their point or their favorites or they're a bit tribal and so on it doesn't really matter this is simply using the XRPL as an example so I can explain to you because I am fairly familiar with it so just on that the XRPL has actually been going almost as long as Bitcoin it's been going for 11 years it's birthdays on the 2nd of June and I just checked a few moments ago and so far it has solved 80 million blocks of transactions without error or without a hack so I'm reasonably confident that's pretty good you never know there could be a fault somewhere in the code that someone might find one day but so far I'm pretty confident in it anyway so if we're happy that we're going to use the XRPL then the ZERP which is one XRP is the token we have nicknames for everything the ZERP is the token that is the native asset that lives on the XRPL that you transfer XRP or ZERPs from one wallet one key pair to another and to manage our interface with the XRPL and we're going to do it via our phone a warm wallet called XUMM X-U-M-M created by a chap by the name of Vietze Vinh a nice young man with his team over in Holland and they have come up with a whole heap of solutions it's got miles of functionality it's got exchanges and everything else in but we are simply going to use it as a person-to-person or a wallet-to-wallet transfer mechanism so first thing you have to do is go and download and install it and then we'll start we open it up and we start creating an account now there's lots of demonstration videos on YouTube I'm not going to bother you trying to talk you through it here the bottom line is that the steps that you go through is the first thing you do is with any key generation is you're given a seed phrase or seed words or a passphrase you might call it that is to have our key pair our public and private key we need to have some sort of backup so if we lost our private key or our little device that stored it was destroyed we had some way of recreating that so they give us an absolute backup system called a seed phrase in some crypts cryptos it is a bunch of 24 words picked randomly in order from a big list in the case of some it's simply six I think it's eight-digit numbers and those numbers or the seed phrase you are to write down and record and store securely because at any time if you were to lose control of your private key or your to the device was to fail or whatever you want it whatever problem occurs by entering those seed words in the correct sequence back into the original application it will regenerate your key pair so they are really we call them the keys to the kingdom so wherever you put them make sure they're secure some people won't say who actually stamp them in titanium and bury them in a safe in the ground anyway so you'll get a seed phrase and have to put that aside and then the app will ask you have to demonstrate that you've got it written down and you've recorded it and so you've got to put the seed phrase back into the app just like you would to create recreate the key pair later if you have to you have to put seed phrase back in and then it will generate your key pair for you so it will generate a private key and then from the private key it will derive the public key it will store both for you it will keep the private key secure you'll only be able to access that by putting in a pin number of some kind it's just that second layer of security we talked about security and convenience and then you'll be able to act on the ledger you be able to make transfers from your public key to another public key from your account to another account so here we are we've got our first interface your first crypto account now we have to figure out how to get some of your wealth on and off the ledger we call that on ramping and off ramping we'll use an exchange or something similar for that but we'll talk about that next time you've done well yet again it's a little bit longer this time twelve and a half minutes so again thank you for your attention