Bitcoin explained easily offended

This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded. In the case of Bitcoin, blockchain stores the details of every transaction of the digital currency, and the technology stops the same Bitcoin being spent more than once. The technology can work for almost every type of transaction involving value, including money, goods and property.

Its potential uses are almost limitless: Blockchain could also help to reduce fraud because every transaction would be recorded and distributed on a public ledger for anyone to see. In theory, if blockchain goes mainstream, anyone with access to the internet would be able to use it to make transactions. Currently only a very small proportion of global GDP around 0. The Bank of Canada is also experimenting with the technology.

And Silicon Valley venture capitalists are also queuing up to back it. This is how blockchain will change your life Will blockchain change the world? Rosamond Hutt , Formative Content. The views expressed in this article are those of the author alone and not the World Economic Forum.

We are using cookies to give you the best experience on our site. By continuing to use our site, you are agreeing to our use of cookies. Rosamond Hutt Formative Content. Why dictators love development statistics and other top economic stories of the week Margareta Drzeniek-Hanouz 07 May And if you continue to do this with ten dice you get 26 bits of entropy, and you need a lot of possible combinations of things to get a lot of entropy.

When we talk about brain wallets and passphrases, the objective is to have a passphrase that has sufficient entropy built into it. So far, so good? I think you said it perfectly. So these big numbers are sometimes hard to understand, and having a good analogy is important for me, personally, to understand it. And, as we said earlier, about going from private keys to public addresses. There are actually 2 to the th possible unique public addresses. But 2 to the th, How big IS that?

What might that be? How much water would be equivalent to 2 to the th drops? What about a water balloon the SIZE of the earth. How many drops is that? A water balloon the size of Jupiter? Surely, a water balloon the size of Jupiter should be good. The answer is astonishing.

So these bathtubs full of drops of water are actually scattered randomly amongst the 50 million billion Jupiter water balloons. Hey, by the way I love that analogy. That really does give a great picture of it, in the bathtub and everything.

The standard approach that the brain wallet world uses is this thing called the SHA hash function. It can be a word. It can be a sentence. It can be the contents of a book. It could be whatever you want. And it will generate a random, bit output. And there are some wonderful properties that SHA has. The output is indistinguishable from random, which means that if I take a 50 page tome of original prose that I wrote, and I enter that as my passphrase, if I just change one comma to a period the SHA looks indistinguishable from the first one, and indistinguishable from random.

In other words, I cannot find two passphrases that generate the same private key. So all those things are essential components of mechanisms that convert passphrases to private keys. So, now that we have the basics, what does it take to create a brain wallet? So people — humans - are very, very bad at creating random passphrases.

So, as we talked about, passphrases have to have sufficient bits of entropy. And it turns out that [there is] debate about how many bits is necessary. Then what you have is a series of words that are random, that nobody can guess, has lots of bits of entropy, and you can use that as a passphrase.

Some people say for brain wallets you probably need eight. I personally think you need ten. So those are the basics. Now I want to shock you, and scare you, with all the things that are bad. So, the first one is about weak passphrases.

But a WEAK passphrase happens when people are confused with how random something looks, with how random the output is. So if your input is not big enough, then the number of possible SHA hashes that it generates is not big enough EITHER, and an attacker can try a brute-force attack on known passwords.

And so there are bots that are running out there. People are working on this kind of thing. So what some people believe they need to do is create some physical documentation of their brain wallet passphrase, and keep it deeply hidden. Of course, you touched on this other one, which is the known content danger.

Well, you know what? Well, you may not remember. For me it would probably be one smack. But that definitely IS a danger in the future. But anyway, crazy stuff. But yeah, so the dangers sound very real for brain wallets.

The dangers DO sound real. So starting with one high-entropy, memorized, random passphrase you generate a private key. So now you can think of being able to create a deterministic string of private keys that you eventually regenerate all from the first brain wallet. What kind of phrase do I want to use? But can you give a mock example of a brain wallet that someone can actually use that YOU would consider safe.

But back to the principles of what makes a very strong passphrase: And the second truth is [that] they are VERY powerful when used correctly. But again, as I said, my own personal learning that has occurred in the exploration of brain wallets has been fascinating.

So they have to do this pretty quickly. How are they going to get that from the paper wallet into the brain wallet in 24 hours? Now, why do you not want to do that? Are you afraid of trojans in your computer that are watching your every move? What is the reason why you would want to generate your brain wallet from an offline computer?

And how do you do that? So you can download the HTML source code. From these web sites they will provide you with a link to the GitHub repository, where you download it onto your computer. So you want to copy the HTML code. Where are you copying that? Are you copying that onto a thumb drive? Now back to your analogy. So then the question of how you get your paper wallet is [that] you use either your Mycelium app on your phone, or your Circle app, or whatever app you use, or your hardware wallets, or Armory or other wallet management systems, and basically sweep your paper wallet and transfer all that into the private key that is associated with your passphrase.

Now how would you get it to your private key? Then you sweep your paper wallet into whatever wallet system you use to sign transactions. Using your offline computer, when you create this Bitcoin brain wallet, I assume that when it gives you the private and public [keys] it would also give you a QR code? It also gives you the hex representation, as well, that you can type in manually. But you indeed DO get QR codes that you can use to send to. You could have it online, [or] you could have it somewhere else.

So yeah, you sweep it there to the brain wallet, [and] you have it in the brain wallet, and then I leave the country and feel safe. Or if I get my hands on a hardware wallet, like Trezor https: Just play with it now [by going to] Diceware http: The way that I keep a word passphrase in my brain [is] when I do exercise. There are MANY opportunities through the course of your day where your brain is not doing anything, You might as well have it remember its passphrase so that if you DO have [only] 24 hours to get out of the country then the passphrase is there.

Right, the passphrase is there. So access to http: That was my main objective. So what did I do? I went back online — I had done everything offline — to http: This is so cool! For the first time in my life I felt like James Bond [laughter]. That would be so cool. But this is fascinating stuff. I know that for any listener who is listening who has never heard of a brain wallet before, they are probably sitting back, with their brains [melting, or exploding] or something.

So that was MY fear, trusting that Bitadress. Actually, I forgot to mention this. What I did was just went to Bitaddress. I did a bunch of gibberish that I copied and pasted across all three, and every single one of them generated the SAME output.

So that [kind of gave me] more trust in them. But as I said, if I was going to do this for some serious money I would actually go and figure out how to do the full digital signature validation process as well. So yeah, this is exciting stuff. Listeners, you can create your own brain wallet today, and if you want to you can leave it empty, right?

Keep your brain wallet empty for a rainy day, in case you need it. Nick, thanks so much for taking time to be on Bitcoins and Gravy, and to talk about brain wallets. Can you give us some closing words? So, it provides not only intellectual challenge and a great learning opportunity, but it also is personal freedom in the long run.

I think it is worth knowing how to use, and just being aware of it, so that if and when the time comes you have that at your disposal. Man, I love it. That is great stuff. I think this has been the best explanation for brain wallets that I have heard, ever.

And I think that, Nick Pudar, you should write the definitive handbook on creating Bitcoin brain wallets. I would not be surprised if you sold them like hotcakes. Hey Nick, thank you so much for being on the show, and for taking time to explain all of this to us. This is great stuff, man. Thank you very much. Rocking back and forth on his heels, he hummed under his breath.

In his mind he matched words to the melody, touching each in turn to comfort his soul. In front of him a dirt road cut across his field of vision like a line in the sand. Beyond it, marked only by a fetid stream, was the border. And on the other side of that, a fenced camp. The Red Cross would be there with clean water and rice gruel. Perhaps he would EVEN get to wash, but not leave. If he crossed the border they would make him stay in that camp, locked behind a fence as if he had committed a crime.

Still, the world outside would be free, and he could have visitors. That would be good enough for his plans. On THIS side of the creek no one stopped him from crossing. It was too early. But if he wanted to get into that camp he would have to wait for them. Only they could issue exit visas, and without one the guards on the other side would only drive him back.

He tried to ignore the throbbing infection in his arm, and the cramping in his abdomen.