Ethereum signatures and transactions using a hardware wallet

If you are interested in understanding Ethereum signatures and transactions by creating security-focused software, you should read the guide we have prepared for you.

Blockchain systems offer its users unprecedented ownership over assets (coins, tokens, etc.). As long as the user’s private key is kept secure, they are the only entity technically able to control their assets.

On the other hand, the lack of any central authority in blockchain systems means that if a malicious actor gains access to a private key, there’s nothing stopping them from irreversibly stealing assets it controls. That’s why keeping private keys secure is an absolute necessity when working with blockchain-based solutions.

We’d like to explain how Ethereum transactions are constructed and how signatures using a private key work. We’ll also explore how a private key can be kept safe using a hardware wallet.

Main problem

The private key needs to be stored somewhere so that it can be used for signing. The key must be physically present on some storage and accessible by the software generating the signature. By being accessible, it’s prone to theft, in one way or another. You can use various techniques, like encryption, to try to “hide” your private key. However, if someone can get their hands on the encrypted file and passphrase, they will effectively gain access to your assets. So how can we generate signatures without the risk of private key theft?

Hardware wallets

What if we locked the private key in a box and made sure it’s not physically able to leave that box or be read? And what if that box could somehow generate a signature based on that private key without ever revealing it? Change that box into a device and you got yourself a hardware wallet. Hardware wallets come in many different variants to suit different needs, but most popular ones connect via USB or Bluetooth.

Security

In a space where the loss of a private key means irrevocable loss of the asset it controls, we should do everything we can to ensure the highest level of security, and hardware wallets offer one hard to match by any other solution. Despite their advantages, hardware wallets require a level of deeper understanding when it comes to cryptography and signatures.

We have prepared for you a short guide. We’ve used a specific hardware wallet as an example, but the information in this article should be universal to any solution. We’ve also created a Python library that allows easy interaction with Blockchain Security 2Go available at https://github.com/rexs-io/blocksec2go-ethereum. It uses the same methods mentioned in this article and can serve as a base for interaction with any hardware wallet.

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