Keep Your Private Key To Yourself

Never ever, and that means EVER, reveal your private key to anyone. That means it is better you take it with you to the grave or lock it up with a will rather than entrust it with a third party or anyone you know. There are plenty of stories of how careless people can get with their private keys. This has led to unrecoverable funds, digital identity theft and hacked digital wallets. If you were to give your private key to someone and they lose it, your only chance of recovery would be the seed phrase generated during the key creation for your digital wallet. If you lost those seed phrases, good luck because chances are there is no other way to recover your private key.

Why is it so hard? This is probably the reason mainstream finance is turned off by cryptocurrency. Digital wallets are mostly not user friendly and there is no technical support to help users recover their funds or private keys. The apps provided for cryptocurrency are open source, and available to the public but there is no one supporting it directly. It is decentralized, so the best resources to contact are members of the community who are knowledgable about the subject. Unfortunately, not even the top tier engineers and developers of the cryptocurrency can help you recover or generate a new private key unless it is for a new digital wallet.

What many people don’t understand is that private keys were not meant to be recovered. Only one unique private key is created for a digital wallet, and that means there is no master key that can open a backdoor to help anyone recover their funds. That was by design due to the open source and decentralized nature of the blockchain. This sounds like a bank is still the best place to store your wealth because they provide full customer support. Now I am going to explain the difference between a bank and the blockchain, in the context of cryptocurrency and private keys.

Banks are highly centralized and they are pretty much in control of your wealth. No matter how much money you have deposited in a bank, policies still dictate how much you can withdraw, where you can send your money and what you can do with it. If a bank were to go bankrupt, your funds go along with it. Banks won’t voluntarily give you all their money if they are closing. You lose all your wealth in the worst case scenario. In times of financial crisis, banks can also stop withdrawals to prevent bank runs. You are mostly at the mercy of your bank when it comes to money, and they will gladly take what you deposit while giving you permission to withdraw your own money. It doesn’t really make sense, but that has been the mainstream banking system for decades now.

Compare that to cryptocurrency and the blockchain, you have financial independence. You control your own wealth through your private key, which is why it is so important not to lose it or let others access it. A private key is not even a tangible object, it is a digital code consisting of numbers that have been cryptographically generated and stored as a file. From your private key you get a public address which is created from your public key. The public key is derived from the private key to generate the public address. This is like your account number that is allowed to be exposed on the network. Funds deposited or withdrawn are recorded on the blockchain. The private key also authorizes you to send and receive funds using a digital signature. The digital wallet is basically where you store the private key. To keep the private key safe, store the file away from your computer or online drive. The best recommendation from experts is to use a hardware wallet, which is an offline device that secures private keys. That would prevent hackers from accessing it online since the only way to access it is from the device.

The lesson here is that if you want financial independence and control of your own wealth, it requires plenty of responsibility. That includes managing your private key by keeping it in a safe storage location like a hardware wallet. Make a backup, but store it wisely and not somewhere it can be accessed publicly (e.g. file sharing site). You can copy it to a thumb drive to be stored in a vault or a secure enclave in a smartphone if supported. There will be more robust solutions for key recovery systems for digital wallets, but until that time comes, users should always be alert regarding their private key. If anyone asks for your private key so they can send you funds, ignore that request. There is never any reason to reveal your private key to anyone. It is not like a driver’s license number or SS number which you do need to provide sometimes. A private key should only be known by its holder and never shared or revealed to anyone. You have the right to protect your privacy and it is secured through cryptography on a blockchain.

Amazon’s Blockchain-based Product Authenticator Patent And How It Can Impact Global Supply Chain Management

If you thought Amazon would never get into the blockchain, they already have. They patented a new system for supply chain management that uses a blockchain-based product authenticator. Even before that, Amazon’s AWS already provided a blockchain platform for developers, so this is not merely a PR stunt to show they are in the know. They actually “know” what they are talking about. While the actual details of the patent do not seem to be available (as of this writing), many news sources have reported that it had been approved.

What Amazon is developing has significance in modern business. They are building a system that compiles data from distributors, manufacturers and shippers using an “open framework”. This gathers real time information from what would otherwise be silos of data. It interconnects those involved in the supply chain with a trusted platform using a distributed ledger for accountability and transparency. That is a way for tracking the authenticity of products as they are packaged and shipped to retail.

One of the things this system can do is prevent counterfeiting and product theft. There is a huge black market from stolen luxury goods and another problem is that there are fake products being sold around the world that is cutting into the brand’s profit margins. This also affects consumers who are not purchasing genuine products, but fake rip-offs that have no value. Many just buy the fake items because of status. The harm it causes though is not apparent, but does affect the brands whose name is being counterfeited in these fake products. A real genuine luxury handbag like that from Gucci come with authenticity certificates or labels, while counterfeit products do not. Products can be tracked using its GTIN (Global Trade Item Number) which is a code that verifies a genuine product from its source.

A blockchain provides a way to track the products in the supply chain and earn trust among suppliers and distributors with more transparency. That is a way to make sure that no hidden party is involved in the process, since it is being recorded on a distributed ledger which others involved in the process can view. If there are any anomalies, it can be detected and corrected. For example, if the products suddenly change distributors, it can be red flag to the supplier. The blockchain records that and can notify the supplier if and when it happens. With legal agreements enforced, this can then be disputed by the supplier.

Now that Amazon’s plans are clear, will it affect the current ecosystem of projects that are doing the same thing? Amazon is known to kill off startup businesses who cannot compete with the retail and tech giant. Amazon has its own platform and infrastructure to remain dominant. This could open the market to more competition with Amazon, as other companies propose their own solutions. IBM and Deloitte are just some of the companies that have already been involved in exploring blockchain-based solutions for supply chains. Even Amazon retail rival Alibaba has championed the use of blockchain systems. Numerous other tech companies, like Facebook (Libra digital payments) and Microsoft (New patent for cryptocurrency) have started their blockchain projects for other types of applications.

According to Deloitte:

“Using blockchain in the supply chain can help participants record price, date, location, quality, certification, and other relevant information to more effectively manage the supply chain.”

IBM has stated:

“Supply chain data is not always visible, available or trusted. IBM Blockchain helps supply chain partners share trusted data through permissioned blockchain solutions.”

Alibaba has numerous blockchain patents. According to an article from Smartereum:

“The Chinese giant will rather pioneer efforts in the blockchain space than lose out on early gains of blockchain adoption. So far, it has adopted blockchain to fight food fraud, secure medical data and track cross-border shipments.”

Amazon’s entry into the market shows that big business is taking blockchain seriously as a solution to real world problems rather than merely a novel technology. Patents are still just on paper, and not actual products. Once they get their product to market and it proves effective, Amazon’s patent could gain industry adoption as a standard for supply chain management.

The DAG Network Model Architecture In Distributed Ledgers

Not all cryptocurrency or digital currency are based on Bitcoin. In fact, some of them don’t even use a blockchain. They are graph-based networks (e.g. DAG, Hashgraph) which arrive at consensus much differently. The notion of a blockchain has become the most synonymous with cryptocurrency, but that is not applicable to all. IoTA, Hedera, Nano and Byteball are examples of graph-based networks. The most common type used is a DAG (Directed Acyclic Graph), which is more scalable network solution than blockchain based distributed systems. A DAG is not a blockchain but both use decentralized cryptographic databases in a sense that a Ferrari is not a lamborghini but are both cars.

A blockchain connects blocks by hashes which can be traced back to a primordial block or “Genesis Block” which is the root of all hashes. It uses a tree topology of nodes called a Merkle Tree, which has leaf nodes that contain the cryptographic hash from child nodes. When these hashes are concatenated, they can be traced back to the Genesis Block in the network. Blockchains use a consensus mechanism to validate the blocks, with PoW (Proof-of-Work) being one example that is used on the Bitcoin network. Consensus is what secures the network by way of validating a block and adding it to the blockchain where it becomes immutable so it is no longer subject to change. This prevents tampering and data manipulation. The consensus requires nodes called miners who must compete with one another by solving a cryptographic puzzle using a probabilistic zero-sum game approach. The miner who solves the puzzle first becomes the block validator and is rewarded with Bitcoin (BTC) for their contribution.

A DAG is a finite graph which is directed forward in one direction with a topological ordering. It consists of vertices that lead to other vertices, which are paths called edges. The vertices are like points in a network. The system uses an “Efficient Teacher Grading” method instead of miners doing PoW. A DAG uses peers to help validate transactions in the network. When a new transaction is made, a new vertice representing the transaction is created and must be validated by other peers on the network. It doesn’t require solving a puzzle, but relies on confirmations as the consensus using a gossip protocol mechanism. When other peers on the network can confirm the transaction as correct, it will be validated.

A DAG network is much faster than PoW since it doesn’t rely on compute intensive puzzles. This allows it to run on lighter devices in contrast to PoW systems that rely on power hungry ASIC devices that perform large numbers of calculations to solve the puzzle. This is rather inefficient, so it requires more energy to produce coins or tokens. A DAG is much faster and scalable since it doesn’t require the same overhead as a blockchain network when it comes to consensus. Costs are lower too because there is no need to purchase expensive equipment that use plenty of electricity. A DAG can utilize mobile devices like smartphones to help confirm transactions on their network. This also makes DAG more suitable for micro-transactions which require instant validation of transactions. DAG offer less barriers to entry because practically anyone can become a peer using their low-energy consuming smartphones while PoW requires more investment in hardware that require a consistent supply of electricity to operate.

Scalability has been the main reason for DAG over blockchains. A blockchain like Bitcoin has scaling issues because of the consensus mechanism it implements and the protocols used on the network. It was not developed for high throughput transactions like the VISA or Mastercard network. VISA claims it can process 1,700 TPS (Transactions Per Second) or 150 million transactions in single business day. Bitcoin’s blockchain can only process between 3 to 7 TPS only. Security has been a consistent strength of the Bitcoin blockchain, as it has never been successfully attacked (e.g. 51% attack) as of this posting since it started in January 3, 2009. DAG have not been in production for that long and have mostly been used on experimental and concept networks. A DAG is mainly used for DLT (Distributed Ledger Technology) implementations while blockchains are used on trustless permissionless public networks.