The Address Where Your Bitcoin Can Be Deposited
by Shivangi Gandhi
January 14, 2020
Can you explain BRD and your role there?
BRD (formerly known as breadwallet) is known as one of the largest consumer cryptocurrency wallets in the world with 3 million mobile users in 170 countries. We protect around $6.5 billion in assets.
In 2019, we created a new enterprise product that allows enterprises to get to market with blockchain technology faster and cheaper. We developed a single responsive API to access the most common chains with high availability. We use this API to power our BRD consumer wallet. Stay tuned for the official product launch in early 2020.
As for my role, I started off leading Android development at BRD in early 2018. Over the last year I have taken on new responsibilities and I am now the Senior Director of Engineering leading the entire mobile team as well as the newly formed enterprise team. It’s been an exciting journey so far and I’m looking forward to the road ahead!
The following questions are listed chronologically according to this simplifier video.
“The address where your bitcoin can be deposited…"
What does this mean? Where is it actually?
This is what a bitcoin address looks like: 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2. The address uniquely identifies your account on the blockchain. This is like your bank account number. If I have your bank account number, I can deposit USDs into your bank account. If you have my bitcoin address you can use that to send me bitcoin.
There are many types of wallets. For instance, a paper wallet contains your address and your private key. You cannot send transactions without a software wallet though. Software wallets (like BRD) vary in functionality, but generally will have your address, your private key, your transaction list, and will allow you to send money.
Note: with our wallet, we (as an org) do not have access to your private key. Let me say that again, we don’t have access to your private key. In the age of social media and surveillance, we sometimes forget that as individuals we have a right to privacy. In the BRD wallet, your private key is generated within the secure storage of your Android phone or iPhone.
This makes the wallet decentralized.
Why is the private key / password 12 words (or 24) specifically?
Your bitcoin private key is actually a 256-bit number which can be represented as 64 character hexadecimal number. Since 12/24 words are more human readable/memorable, generally we use these words as a seed to derive our private key. (Subsequently, the bitcoin address can be derived from the private key.)
The 12 words are selected from a 2048 word dictionary. This means there are 2048 to the power of 12 possible keys. This number is sufficiently large enough that the phrase could not be guessed or discovered in a brute force attack in a reasonable amount of time.
Where can you get a cold wallet?
You can buy hardware wallets online. Some of the best hardware wallets are made by Ledger and Trezor. A paper wallet is also a cold wallet because it's not connected to the internet. You can generate one using a service like Bitcoin Paper Wallet.
How do you put money onto a cold wallet? Similarly, how do you take it off?
Depending on your hardware wallet, your configuration steps will vary, however, at the end of the process your hardware device will have a private key generated on it and you will have some way to obtain your bitcoin address.
Then you would buy some bitcoin on an exchange (like Coinbase). The exchange will have a way to send money to a bitcoin address. Alternatively, someone with bitcoin could also send it to your hardware wallet address.
To send bitcoin from the hardware wallet you need to connect to a computer. With Ledger for instance you connect the device to a computer which is running their app. You will have an option to send bitcoin in the app. You will enter the amount and the address you want to send the money to. Then the software will create the transaction. The transaction data is sent to the hardware device and signed using the private key on the device. The private key was generated on the secure hardware and it must never leave that hardware. The hardware is equipped with a chip (like the one in your credit card) where the key is stored. The hardware device passes the signed transaction data back to the software which sends the transaction out into the network for confirmation. The hardware should be connected to the computer for as short a time as possible.
Regarding custody, can you leave your Bitcoin to someone else? In the way you could inherit dollars, could you inherit bitcoin?
Well if you are using a centralized service, leaving it in your will would be equivalent to any traditional bank account that you are also leaving behind. I'd assume that a good exchange would have a record of your beneficiaries just as your traditional bank would. For the decentralized wallet, remember that the power is in the individual's hands. It's up to you to manage this. You could, for instance, leave in your will a key to a safe deposit box that has your recovery phase in it or your hardware wallet and PIN. It’s probably a good idea to leave behind some instructions on how to recover the money especially if your beneficiary is not well versed in cryptocurrency.
Where is the “exchange”?
They are online. The best known is probably Coinbase but there are many others like Binance, Gemini, Kraken, Shapeshift, etc.
Who is verifying you for a hot wallet?
The company that creates the wallet is responsible for this and may or may not do it. Since BRD is decentralized, we do not verify any person. However, we use partners to allow our users to buy cryptocurrency with traditional currency. Any time this happens, the company (in this case our partner) must have the user fill out a KYC (know your customer) and this information is verified. Usually you'd provide a picture of your ID and some personal details.
Who regulates them?
Regulation is a work in progress. When you have an exchange that is doing fiat to crypto trading, they must deal with a traditional bank which will require KYC procedures. Exchanges that only do crypto to crypto trading can effectively impose their own rules because there is not much regulation at this time.