Intro to Keys and Wallets

Hey, everyone. Welcome to Fireblocks Academy. My name is Chris Jamieson, and I’m the director of enterprise programs here at Fireblocks. And in this video, what we wanna walk you through at a very high level is what are keys and wallets. Now Now there are three basic things I’d love for you to walk away from this with today are one, what are wallets and the different types of wallets that exist today. The second being, what are public and private keys? And the third being, why it is so very important for you to safeguard your private keys?

So I think in order to do this, let’s start with a very simplistic example and go ahead and dive right in.

Now let’s just say that I have US dollars that I want to deposit in my local bank.

Now, I know that that money is in the bank. I can go in. It’s probably sitting at a vault or a safe somewhere. I can go in. I could touch it. And most importantly, I can take it out, let’s just say via the ATM, and I can put it in my physical wallet.

I can then go about my day and transact as I need to. Now in the digital asset world, your digital assets actually don’t physically live anywhere. They actually live on the blockchain and what you own are public and private keys that essentially allow you to move those assets from one place to another and transact as needed. Now, public and private keys from a very high level are essentially just alphanumeric strings. They’re very, very long and they’re very difficult to replicate, if not impossible, especially your private key.

But they essentially allow you to cryptographically sign for transact digital asset transactions so that, again, you can move them from one place to another. Now let’s take a step back and let’s dive a bit more into wallets first, and we’ll come back to keys, and then we’ll put it all together. So as we said, your digital assets actually live on the blockchain, and what they live in are digital asset wallets. Now I like to think about my digital asset wallet as a little treasure chest.

And this treasure chest has basically three kind of key features that are worth highlighting. The first are that it has an address.

Let’s just call it ABC for simplicity’s sake. Now that address basically allows other people to know where to send transactions to and also seeing where transactions are coming from.

The second is that let’s just say this wallet is gonna hold a specific type of crypto or digital asset. Let’s just call it Bitcoin for for for simplicity’s sake. And the third is that we’re gonna basically, have two figurative keyholes here, and those are for our public and private key.

Now, there are three different types of digital asset wallets that you should be aware of.

The first is a hot wallet, and this is essentially a browser based extension. So, say, like, MetaMask.

The second is a warm wallet, and this can be a SaaS or desktop application that also requires authentication, typically from some sort of external device like an iPhone two factor authentication, something like that.

And then the third is cold, also called cold storage, and these are non Internet connected devices such as an unplugged USB stick.

So if we wanna actually take our assets out of a digital asset wallet, transact with them, move them around, etcetera, we need to use our public and private keys. Now a public key, very simply, is exactly that, a key that is known or available to the public. Anyone can know this. Your actually your actual wallet address is based off, the address of your actual public key or ID of your public key. I’m sorry. Now, your private key is actually a completely different story.

This is one hundred percent just for you.

Now, your private key is extremely important. And that’s because when you go to actually initiate a transaction and as you go through the transaction process, you’re gonna be asked to authenticate your transaction, which means you’re gonna have to use your private key to sign or authenticate that transaction. Now, if a malicious actor, let’s say, were to get a hold of your private key, they could essentially go into your wallet and actually move assets out into someplace different. And once those assets are moved, you’re never gonna see them again. They’re basically gone forever.

Now as a retail investor, that’s obviously very scary. But if you’re an institution that is potentially managing tens, hundreds, you know, tens of hundreds of millions of dollars, maybe even billions of dollars, This is something that is, to be taken very, very seriously. So safeguarding, and keeping your private keys, extremely secure is of the utmost importance.

Now, let’s take a step back and let’s kind of put all this together and see how it works, you know, in a very simplified reality.

Let’s say that I want to send one bitcoin to my friend.

So my friend has his own treasure chest or wallet and he has an address. Let’s call it DEF. This is his Bitcoin wallet, let’s say, and he has his two figurative keyholes here as well.

Now, essentially, what will happen is is that I will go into my, you know, digital asset portal of choice, and I will go and enter a transaction where I will essentially type in, the actual address and say I want to send my my one Bitcoin to def. And then I will say how much I want to send. I’ll say one Bitcoin.

And then I’ll basically hit go. And then from there, I’ll be asked, do you want to authenticate this transaction, which essentially means I have to take my private key, put it in my private keyhole here. And then once that’s done, the transaction will take place. It’ll be executed and then confirmed and settled on the blockchain. And that one Bitcoin is now officially moved into my friend’s Bitcoin wallet.

So to summarize, your digital assets actually live on the blockchain and they essentially live inside our little mini treasure chest called our digital asset wallet. And public and private keys are essentially what allow us to move those assets from one place to another and your private key is of the utmost importance because it allows you to authenticate those transactions to actually move them. So safeguarding them and keeping them very secure is extremely, extremely important and something to be taken very, very seriously.

That’s it for now. Please join us for more educational content at Fireblocks Academy. Thanks so much, for joining.