DEV Community: Francis

Cold wallets vs. hot wallets

Francis — Wed, 09 Mar 2022 09:49:30 +0000

Understanding cryptocurrencies forces individuals to learn about financial instruments that previously might have been unreachable. Traditional banking systems have been responsible for holding finances for decades, and only in times of political uncertainty do people rush to retrieve this cash. The onus of securing these assets in crypto is on to the individual. Users are required to understand the instruments that make this possible.

The adage "not your keys, not your coins" is at the center of this discussion. Meaning crypto-assets purchased on exchanges are not necessarily yours but owned by the third-party intermediary, as they have control of the wallet's private key.

Wallets
Cryptocurrencies are stored in digital wallets that facilitate the usage and management of various digital assets, not unlike a bank account. Turning every crypto holder into a bank makes security essential.

The key features of a crypto wallet are its private and public keys. The public key is similar to an email address in that it is used to receive money or other assets transferred to a user's wallet. It is also known as an address. This address is shared publicly, but owners need to understand that anyone with their public keys can also track their entire transaction history on the blockchain. Users that are not comfortable with anyone tracking their financial activities need to have a good juggling act between multiple wallets to try and obfuscate their identity.

The private key is like a password and should never be shared with anyone. Common crypto scams involve tricking newbies into giving over their private keys or playing on individuals' greedy nature by offering them access to a wallet with X amount of funds. Not financial advice, but nothing is for free, don't be greedy.

A lengthy string of random, algorithmically produced characters represents each key.

Seed phrases play a vital part in any crypto wallet; recovery of a lost wallet is impossible without them. Seed phrases are a group of 12 to 24 random words that the wallet provides after creating it. Seed phrases should be kept in a safe location where no one can access them and should not be shared. If a wallet's owner ever loses access to their wallet, they can use the seed phrase to generate public and private keys again.

The exchange controls the private keys of cryptocurrencies bought on them. Users can keep their cryptocurrencies in their wallets if they so choose. There are two types of off-exchange wallets: hot wallets and cold wallets.

Hot Wallets
Hot wallets' defining characteristic is their connection to the internet. For most users, it's the first kind of wallet they will own. Generally, the wallet is in the crypto exchanges' mobile or desktop application. Having a connection to the internet is essential in crypto as it aids in trading, purchasing, and a variety of other activities. The internet connection is what exposes wallets to a security risk. There will always be malicious actors testing the limits of every protocol or wallet to find a breaking point, to extract funds. Understanding how to mitigate this is important. That's why it's not a good idea to keep all of one's money in a hot wallet.

Cold Wallets
Cold wallets have no internet connection, and a byproduct of this is that they are a bit cumbersome to use. They are only connected to the internet when users need to transfer in or out of the wallet. Two types of cold wallets are hardware wallets and paper wallets.

Hardware wallets have a distinct look since most look like a USB stick. Hardware wallets technically do not hold cryptocurrency; it is always on the blockchain. The wallets' purpose is to store private keys of said cryptocurrency, removing blockchain's access until it is needed again to activate new transactions. When users need to reaccess these funds, they can connect the wallet to its dedicated software, reinitiate network control of their asset, and transfer it wherever required.

Paper wallets are exactly how they sound, a piece of paper with public and private keys printed on it. Some could have a QR code as well. Technically it is the most secure wallet someone could own, but early crypto adopters can attest to its frailty. Paper can be misplaced, stolen, susceptible to water or fire damage. The ink could run over time, ruining the readability of its contents.

When creating a paper wallet, the keys are removed from the blockchain network, and coins are unreachable without them. To reaccess these funds, users need to scan the private key QR code into their hot wallets.

Closing
Most new crypto users have only used hot wallets because of their convenience and the exchange's security reassurances. We should never forget if you don't have complete control of your private keys, you are not in control of your finances. Crypto was created to remove third-party intermediaries between individuals and their money. Being your bank and being responsible for your funds is a frightening endeavor, but it can be enlightening if you want to attain any amount of financial literacy and independence.

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Layer 1 vs. Layer 2

Francis — Mon, 28 Feb 2022 05:12:41 +0000

Why is blockchain scalability important?

The application of blockchain technology in finance is invaluable, but it does have inherent drawbacks known as the Blockchain Trilemma. It establishes a balance between security, decentralization, and scalability of the network. Blockchain security prioritizes the protection of the network from bad actors and attacks, while decentralization deals with how the network capabilities are divided across multiple computers globally. Decentralization ensures that the service cannot be destroyed because there is no head. A blockchain network is more like a hydra.

Security and decentralization are essential pillars in any blockchain network. The necessity of adding scalability to this network is challenging. Scalability focuses on the network's ability to handle high-frequency transactions and change. Without it, the blockchain network has no chance of replacing the traditional financial system. Compared to Visa, Bitcoin processes 4–7 transactions per second, while Visa does 1,700.

Currently, most DeFi projects are suffering from extremely high transaction fees. Due to the increase in traffic on the network, more users on the network congest it, and transactions are processed by paying fees (gas) to the miners. The current solution to congestion has been to place transactions that pay more in fees at the front of the line for processing. This procedure has single-handedly created the high transaction fee race currently. These high fees have been a barrier to entry for most individuals interested in crypto. Without a solution, the ones with the most coins will be the ones shaping the industry.

Layer 1 vs. Layer 2

Layer 1 would be the blockchain Ethereum is built on, while Polygon ($MATIC) refers to a layer 2 solution that relies on the overlaying network established by Ethereum. As a result of blockchain's current inherent congestion issues, layer 2 solutions have emerged to solve these problems. It cannot be completely perfect as layer 2 solutions give up something to achieve higher network speeds. To handle these issues, we examine the layer 1 and layer 2 solutions. By no means is this an extensive breakdown of possible solutions.

Layer 1 and Layer 2 simplified

Imagine the fastest snail that could exist. You want the snail to go faster, but the snail cannot. So you place a treadmill on top of the snail and then a turtle on top of the treadmill; now you have a fast turtle on top of a slow snail. That's layer 1 and layer 2 in a “snail shell.”

Scaling of Layer 1

Layer 1 scale focuses on increasing the number of transactions on the blockchain network. The Ethereum Foundation is proposing sharding, which is the splitting of a database to distribute its capacity. Ethereum (2.0) plans to implement this concept by breaking their distributed ledger, which is technically a database, into smaller pieces, or smaller chains, to improve transaction speed. This ensures their network stays decentralized and improves performance and security.

Another scaling solution is consensus protocol changes. Both Bitcoin and Ethereum use proof-of-work (PoW) to process transactions, which is very costly and slow. Proof-of-Stake (PoS), on the other hand, is faster and has a lower carbon footprint than PoW. Ethereum can process 15-20 transactions per second. This has resulted in high fees and slow process times, but once PoS can be implemented, it can increase speed and reduce fees tremendously.

Layer 2

Layer 2 has two popular solutions for scaling: rollups and state channels. Rollups utilize outside computational capabilities to process transactions, instead of having the network perform the calculations. Utilizing outside computational abilities eases the load off of Layer 1, which increases the transaction speed. With this method, only necessary information is added to the blockchain, making it inherit Layer 1 security while being scalable, and still maintaining decentralization.

State on the chain, a deposit is locked, known as the state, then a channel opens up off-chain for users to transact quickly. Once it is complete, the final last interaction is recorded on-chain, and the initial deposit, or state, is unlocked. Just like the rollups, part of the process is abstracted to increase speed, while utilizing the final security of layer 1.

Closing

Every DeFi project is racing to achieve improved transaction speeds without sacrificing security and the decentralized nature of this ecosystem. Layer 2 solutions might be adopted and expanded on by most emerging projects today. Although Ethereum is also attempting to solve this problem, high fees make it impossible for DeFi to be accessible to everyone. Soon enough, this will be a problem of yesterday, but today we can explore projects attempting to implement these solutions.

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Let's Buy a Pizza: I Have Crypto

Francis — Sat, 26 Feb 2022 07:28:45 +0000

For the uninitiated not all cryptocurrencies are Bitcoin or Ethereum. Ethereum was created to solve perceived problems in Bitcoin; with any technology there will be advancements. Devs and the mining community are always working to solve Bitcoins various problems: one being energy consumption when processing a transaction and the other being swiftness of the network.

Thus, we can buy a pizza pronto.

Verifying

Verifying a transaction is critical to cryptocurrencies: this is what allows us to get our pizza. Transactions can be verified by Proof of stake (PoS) or Proof of work (PoW).

PoS works by participants putting their cryptocurrencies up for collateral with the express intent to approve transactions e.g., Tezos, Polygon.

PoW consumes “some” energy to do some fancy calculations in a race to be first while we wait X minutes to get our pizza, e.g., Bitcoin, Ethereum, Litecoin.

The nature of cryptocurrencies is that they are decentralized, so if your government offers cryptocurrencies, it's no longer decentralized, right? We can get a pizza if a centralized authority is responsible for verifying transactions but is this the crypto dream?

Cryptocurrencies were made to be decentralized so determining how to verify my pizza purchase can be kind of difficult. A problem that everyone, that includes Bitcoin, is trying to solve, without burning down half the amazon rainforest.

PoW and PoS both are trying to add a new block of transactions into the ledger, but do their ends justify the means? I mean I still get a pizza either way, right?

When the Bitcoin network was small PoW made sense, but it’s not an environmentally scalable solution as the amount of energy it takes could make us a lifetime supply of pizza. Some people think that's a problem. Alternatively, PoS is faster and consumes less energy. It uses 99% less energy than PoW.

PoW

In a PoW network every computer is trying to be the first to calculate the solution to a formula allowing them to add their transactions to the blockchain. For their efforts they get rewarded with a new Bitcoin.

This deters bad actors because they would need a lot of energy and money to validate a bad transaction. To secure this network a few polar bears need to move to Hawaii; we all make sacrifices. Since PoW is a race to be the fastest it’s a bit more decentralized than PoS.

PoS

The foundation of PoS is staking, they use validators which means the more crypto they put the more influence they have over the network. Validators stake a certain amount of crypto behind a block they want added to the chain.

Validators can stake their crypto allowing them voting rights to prove legitimate transactions. For their efforts they get back newly created crypto for making the network faster. Having validators approve a transaction is faster than expensive gas guzzling computers doing the proof of work.

There is a problem here, if a validator with the most money gets chosen how is this decentralized?

PoS thought of a solution, validators that misbehave do face consequences. Validators have an economic incentive to do the right thing and if they don’t, they get slashed. Which means when you are bad, they take some of your crypto away, if someone adds to your block their crypto also gets cut too. Doesn’t pay to be bad.

Conclusion

Bitcoin miners set out to resolve its environmental crisis by moving more than 50% of its energy to renewable energy in response to the environmental concerns critics highlighted.

I can get my pizza with both methods but one network answers to the fastest computers at the cost of consuming way more energy than we can justify, while the other adds blocks to the ledger by putting your money where your mouth is.

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Connecting Secure Socket Shell (ssh)🤫 to GitHub

Francis — Thu, 10 Feb 2022 06:25:26 +0000

SSH protocol gives users/system administrators secure access over an unsecure network to a computer.

It is commonly used to secure remote access to resources, remote execution of command, delivery of software packages and updates and interactive and automated file transfers. None of this would be possible if it weren't for the back and forth between the SSH Client and the SSH Server.

First the server sends its public key to the client, and the key is saved on the client. If I tell you that is where the magic happens then they establish a connection, would that be okay for you? Because it is for me.

This does not have to be right, but I imagined it is the Force and the private key must be the midichlorians, you might not want to admit or know it is responsible for all the access and power you currently have, but it is there doing its work in the background.

GitHub is where developers go to count little green boxes//be antisocial and social…. or a code hosting platform for version control and collaboration possibly.

Why GitHub and SSH?
Tired of always entering a password authentication for pushing and pulling to remote repositories? SSH keys got you covered, minus or plus a passphrase if you choose to make one during the set up phase, I traded a password for a passphrase yay me.

Step 1
If you do not already have Git Bash for windows, now is the time to download it. Plus GitHub, I have a feeling you can not get this done without a GitHub account.

Step 2
Enter this in the command line

$ ssh-keygen -o

Generating public/private rsa key pair.
Enter file in which to save the key (/c/Users/PCName/.ssh/id_rsa):
# Sets it to default location

Enter passphrase (empty for no passphrase): [Type passphrase]
Enter same passphrase again: [Type passphrase again]

Your identification has been saved in /c/Users/PCName/.ssh/id_rsa
Your public key has been saved in /c/Users/PCName/.ssh/id_rsa.pub
The key fingerprint is:
SHA256:############################################### PCName@PCName-######
The key's randomart image is:
+---[RSA ####]----+
|         Someth  |
|          ings ar|
|         e just r|
|         ally coo|
|        l when y |
|         ou think|
|         about ho|
|         w it act|
|            ually|
+----[workss]-----+

Do not tell anyone, but now you have a public and private key 🤫.
Located in /c/Users/PCName/.ssh/id_rsa

Step 3

$ cat ~/.ssh/id_rsa.pub
**************** A key is generated here *************** 
#Copy it and go to github

Step 4
Github--> Settings--> SSH & GPR key

To use the ssh key just go to a git repository and select Code, Under Code select SSH and copy to clipboard.

Back to Bash again.

$ git clone [paste ssh link key from github]
Enter passphrase: [enter]

Hope this helps you get work done faster.