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Minh T. Nguyen 2014-06-01 16:47:50 -07:00
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@ -465,14 +465,14 @@ image::images/HD_wallet.png["HD wallet"]
==== Encrypted Private Keys (BIP0038)
Private keys must remain secret. The need for _confidentiality_ of the private keys is a truism which is quite difficult to achieve in practice, as it conflicts with the equally important security objective of _availability_. Keeping the private key private is much harder when you need to store backups of the private key to avoid losing it. A private key stored in a wallet that is encrypted by a password may be secure, but that wallet needs to be backed up. At times, users need to move keys from one wallet to another, to upgrade or replace the wallet software, for example. Private key backups might also be stored on paper (see <<paper_wallets>>) or on external storage media, such as a USB flash drive. But what if the backup itself is stolen or lost? These conflicting security goals led to the introduction of a portable and convenient standard for encrypting private keys in a way that can be understood by many different wallets and bitcoin clients, standardized by Bitcoin Improvement Proposal 38 or BIP0038 (see <<bip0038>>).
Private keys must remain secret. The need for _confidentiality_ of the private keys is a truism which is quite difficult to achieve in practice, as it conflicts with the equally important security objective of _availability_. Keeping the private key private is much harder when you need to store backups of the private key to avoid losing it. A private key stored in a wallet that is encrypted by a password may be secure, but that wallet needs to be backed up. At times, users need to move keys from one wallet to another -- to upgrade or replace the wallet software, for example. Private key backups might also be stored on paper (see <<paper_wallets>>) or on external storage media, such as a USB flash drive. But what if the backup itself is stolen or lost? These conflicting security goals led to the introduction of a portable and convenient standard for encrypting private keys in a way that can be understood by many different wallets and bitcoin clients, standardized by Bitcoin Improvement Proposal 38 or BIP0038 (see <<bip0038>>).
BIP0038 proposes a common standard for encrypting private keys with a passphrase and encoding them with Base58Check so that they can be stored securely on backup media, transported securely between wallets or in any other conditions where the key might be exposed. The standard for encryption uses the Advanced Encryption Standard (AES), a standard established by the National Institute of Standards and Technology (NIST) and used broadly in data encryption implementations for commercial and military applications.
A BIP0038 encryption scheme takes a bitcoin private key, usually encoded in the Wallet Import Format (WIF), as a Base58Check string with a prefix of "5".
Additionally, the BIP0038 encryption scheme takes a passphrase -- a long password -- usually composed of several words or a complex string of alphanumeric characters. The result of the BIP0038 encryption scheme is a Base58Check encoded encrypted private key that begins with the prefix +6P+. If you see a key that starts with +6P+ that means it is encrypted and requires a passphrase in order to convert (decrypt) it back into a WIF-formatted private key (prefix +5+) that can be used in any wallet. Many wallet applications now recognize BIP0038 encrypted private keys and will prompt the user for a passphrase to decrypt and import the key. Third party applications, such as the incredibly useful browser-based bitaddress.org (Wallet Details tab), can be used to decrypt BIP0038 keys.
The most common use case for BIP0038 encrypted keys is for paper wallets that can be used to backup private keys on a piece of paper. As long as the user selects a strong passphrase, a paper wallet with BIP0038 encrypted private keys is incredibly secure and a great way to create offline bitcoin storage (also known as "cold storage")
The most common use case for BIP0038 encrypted keys is for paper wallets that can be used to backup private keys on a piece of paper. As long as the user selects a strong passphrase, a paper wallet with BIP0038 encrypted private keys is incredibly secure and a great way to create offline bitcoin storage (also known as "cold storage").
Test the following encrypted keys using bitaddress.org to see how you can get the decrypted key by entering the passphrase:
@ -509,7 +509,7 @@ P2SH is not necessarily the same as a multi-signature standard transaction. A P2
Currently, the most common implementation of the P2SH function is the multi-signature address script. As the name implies, the underlying script requires more than one signature to prove ownership and therefore spend funds. The bitcoin multi-signature feature is designed to require M signatures (also known as the “threshold”) from a total of N keys, known as an M-of-N multi-sig, where M is equal to or less than N. For example, Bob the coffee shop owner from chapter 1 could use a multi-signature address requiring 1-of-2 signatures from a key belonging to him and a key belonging to his spouse, ensuring either of them could sign to spend a transaction output locked to this address. This would be similar to a “joint account” as implemented in traditional banking where either spouse can spend with a single signature. Or Gopesh, the web designer paid by Bob to create a website might have a 2-of-3 multi-signature address for his business that ensures that no funds can be spent unless at least two of the business partners sign a transaction.
We will explore how to create transactions that spend funds from P2SH (and multi-signature) addresses in <<transactions>>
We will explore how to create transactions that spend funds from P2SH (and multi-signature) addresses in <<transactions>>.
==== Vanity Addresses
@ -574,7 +574,7 @@ users are likely to look at the vanity pattern word _and a few characters beyond
==== Paper Wallets
Paper wallets are bitcoin private keys printed on paper. Often the paper wallet also includes the corresponding bitcoin address, for convenience, but this is not necessary since it can be derived from the private key. Paper wallets are a very effective way to create backups or offline bitcoin storage, also known as "cold storage". As a backup mechanism, a paper wallet can provide security against the loss of key due to a computer mishap such as a hard drive failure, theft or accidental deletion. As a "cold storage" mechanism, if the paper wallet keys are generated offline and never stored on a computer system, they are much more secure against hackers, key-loggers and other online computer threats.
Paper wallets are bitcoin private keys printed on paper. Often the paper wallet also includes the corresponding bitcoin address, for convenience, but this is not necessary since it can be derived from the private key. Paper wallets are a very effective way to create backups or offline bitcoin storage, also known as "cold storage". As a backup mechanism, a paper wallet can provide security against the loss of key due to a computer mishap such as a hard drive failure, theft, or accidental deletion. As a "cold storage" mechanism, if the paper wallet keys are generated offline and never stored on a computer system, they are much more secure against hackers, key-loggers and other online computer threats.
Paper wallets come in many shapes, sizes and designs, but at a very basic level are just a key and an address printed on paper. Here's the simplest form of a paper wallet: