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Hi, crypto entrepreneurs!
Enough of screeching on the surface of cryptonomics!!
This time, dive deep into the mechanics of crypto wallets, a key component of the crypto ecosystem. Learn how a browser-based wallet runs under the hood.
By the time you finish reading this blog, you will develop a clear understanding of the functioning of the wallet. When you dream of setting up a super successful crypto exchange, this is the most basic information you need to master.
Now, let’s begin.
How a browser-based wallet works
Many think of digital wallets as devices storing currency. However, cryptocurrencies lack a physical form and all that the wallets do is record transactions stored on the blockchain.
A white label cryptocurrency wallet is actually a software program that aggregates the users’ public and private keys. The wallet communicates with different blockchains to enable users to examine their balance, send/receive funds, and store their crypto assets. When someone transfers crypto coins to another wallet, what they do is sign off the ownership of the crypto assets to the wallet’s address of the recipient.
If a user wants to spend the currency, the private key stored in the wallet should map the public key of the coins. In case it happens, the coins can be moved as desired, else they remain locked. No real coins are sent or received in this process. The transaction is recorded in the wallet.
Digital Wallets – a blend of banks and leather wallets
A white label cryptocurrency wallet combines the features of a bank and a leather wallet; the only difference is that the crypto wallet doesn’t include a physical currency. When needing to pay from a physical wallet, you take it out of your pocket, find the money, and pay. In a crypto wallet, however, you need a private key to unlock the digital coins deposited into it.
Features of crypto wallets you should look for
If you are seeking cryptocurrency wallet development services to build your crypto wallet, make sure that your chosen development team integrates the following features into your wallet.
Build a wallet with a simple interface that is easy to use even for the beginners. A clean design will enable your users to easily navigate through the wallet.
Fiat is going to stay, no doubt, so the most convenient wallet for you would be the one that facilitates crypto-fiat transactions. A wallet with integrated two-way fiat-crypto capacity will work absolutely fine.
A lengthy, complex password is your first barrier for security along with your identifier, but it may not be enough. Two-factor authentication (2FA) is another layer to keep your wallet secure. Setting up 2FA, a unique one-time use code will effectively prevent a hacker from intruding even if they are able to crack the password.
Most people today want to deal with multiple currencies and the wallet should make it easier for them to switch between currencies. The steps should be minimized to make it easier for users to send and receive cryptocurrencies.
Structure of a wallet
A crypto wallet lies as a file in the users’ file system, holding public and corresponding private key pairs along with the transactions executed through the wallet. User preferences are also stored in the wallet file. These should be in encrypted form to prevent the risk in case a hacker manages to breach.
A wallet address is a character identifier of 25-34 characters involving numbers and letters. Bitcoin addresses generally start with 1 and never hold the number 0 or the uppercase letter ‘O’, or the lower case ‘l’ or ‘I’ to improve legibility.
A Bitcoin address might be like
The existence of any crypto address that doesn’t have AN associated private key is usually improbable. The network gets to know an address after its first use and the associated transaction. Addresses can be created quickly using one of the several available tools.
In case the customer loses the wallet file with keys, there is no way they can use the wallet again. For anyone who is using crypto assets, keeping a secure backup of the wallet is important.
Security challenges to crypto wallets
The concept of 100% security is a utopia. Many people have a misconception that the security in browser-based wallets is all about keeping the private keys out of the reach of unscrupulous people. However, controlling access to private keys is just the component. You also have to be cautious about how deposits and withdrawals are conducted to and from the wallet. An adversary may hijack a loophole in the procedure to highjack funds.
Web wallets have to negotiate some serious security concerns:
All wallet software running on desktops and laptops are vulnerable, to a certain extent, to malware that can breach the deposit and withdrawal operations. It happens because the operating systems are used for a broad array of operations that the hackers abuse as vectors for installing malware. All sorts of malware have been around from the time transactions began happening on the web.
The crypto world was astonished to find out how the thieves had been dispensing compromised versions of Tor Browser for long. The browser itself had an inherent mechanism of bitcoin address swapping.
Though mobile devices are better than the desktops in handling tampering, you need to remember nothing is beyond the threat.
Attacks on crypto exchanges
Digital crypto wallets are a service offered by exchanges. If centralized exchanges get compromised, danger looms over the assets. Mt. Gox attack is a big example.
As demonstrated in the ill-famous Mt. Gox episode, a cyber-attack may not be on the blockchain itself (it is a non-starter), but on a crypto exchange, executed after a lot of planning. Mt. Gox hackers, which involved stealing of 850,000 bitcoins, spent almost a year trying to get into the system. If valued today, these bitcoins would amount to $7.2 billion. When security layers of an exchange platform are breached, all crypto assets stored in it are under threat.
In June 2019, attackers fixed Coinbase employees with a 0-day exploit against the Mozilla Firefox browser, gaining control of the victims’ workstations.
A web browser has an issue that would bother any crypto trader. The browser extensions can capture all accessed and rendered data. In 2018, Kaspersky became aware of a Trojan designed to specifically targeted web browsers and install malicious extensions.
The trojan had a function findAndReplaceWalletAddresses which looked for Bitcoin and Ethereum wallets, changing with malicious wallet addresses. The function worked on all web pages except for Google and a few other popular domains.
Security practices at users’ end
No security mechanism can remain impregnable if the crypto traders aren’t careful at their end. While lessons need to be taken and implemented at the level of infrastructure, traders too need to follow the standard security practices.
A browser-based wallet should only be used on a standalone, single-purpose, air-gapped machine. However, setting up an air-gapped system is complex and most users tend to neglect, risking their funds.
When it comes to securing a white label cryptocurrency wallet, rule number one is – never trust the browser. Get hardware and other software to determine the address.
An example of an additional security mechanism is Partially Signed Bitcoin Transactions (BIP 174) that enables the hardware to determine the integrity of change addresses. The system would disseminate extended public keys and derivation paths with the change address, making sure that the wallet address is correct.
Another example is of a payment protocol that requires the receiving address to be cryptographically attested to by the recipient. The mechanism stems from man-in-the-middle attacks and augments the integrity of payments.
A browser-based cryptocurrency wallet is prone to attacks, courtesy to a string of reasons mentioned above. However, the right security features can fortify the security of a crypto wallet, making it immune to any kind of hacks.
To get a secure wallet, partner with an experienced company offering reliable cryptocurrency wallet development services. You can also trust them for providing clean and robust code that the thieves find hard to breach.
Antier Solutions has earned a name for itself when it comes to developing secure, multi-currency wallets. Sticking to the highest standards of security, we deliver highly-secure crypto wallets to our clients worldwide. We specialize in white label cryptocurrency development, and at the same time, we can build a custom wallet for you from scratch.
Schedule a free demo of our white label cryptocurrency wallet or connect with our subject matter experts to share your needs for a custom wallet.
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