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Securing IEO STO ICO IDO and INO: The Challenges and Solutions

Securing IEO STO ICO IDO INO the challenges and solutions EviCore NFC HSM by Freemindtronic

  Securing IEO STO ICO IDO and INO by Jacques Gascuel This article will be updated with any new information on the topic, and readers are encouraged to leave comments or contact the author with any suggestions or additions.

Enhancing Security: Securing IEO STO ICO IDO and INO

Cryptocurrencies are digital assets that can be used to buy goods and services, invest in projects, or trade on online platforms. In this article, we will explore the importance of securing IEOs, STOs, ICOs, IDOs, and INOs and how you can protect your investments using EviCore NFC HSM technology.

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Securing IEO STO ICO IDO and INO: How to Protect Your Crypto Investments

Cryptocurrencies are digital assets that can be used to purchase goods and services, invest in projects, or trade on online platforms. They are built on blockchain technology, which is a decentralized system that records and verifies transactions without intermediaries. However, to securely and conveniently store your private keys and seed phrases, thus ensuring the security of your funds in Securing IEO STO ICO IDO and INO, you need a wallet that stores your private keys and seed phrases. These pieces of data enable you to access and control your funds on the blockchain

But how can you securely and conveniently store your private keys and seed phrases in Securing IEO STO ICO IDO and INO? How can you prevent losing them or falling victim to hackers or scammers? And how can you participate in various forms of cryptocurrency crowdfunding, such as ICOs, IEOs, STOs, IDOs, and INOs, without risking your funds?

In this article, we will address these questions and explain how to protect your private keys and starter phrases using NFC (Near Field Communication) HSM. We will also compare different cryptocurrency crowdfunding models and show how to store your private keys and starter phrases with EviCore NFC HSM technology for each of these models.

By reading this article, you will learn:

  • What ICOs, IEOs, and STOs are and how to participate in Securing IEO STO ICO IDO and INO.
  • The significance of seed phrases and private keys in Securing IEO STO ICO IDO and INO.
  • The features and functionality of EviCore HSM technology in Securing IEO STO ICO IDO and INO.
  • How to securely store your seed phrases and private keys using EviCore NFC HSM technology across various use cases in Securing IEO STO ICO IDO and INO.

If you have an interest in cryptocurrencies and want to understand how to secure your funds with EviCore HSM technology in Securing IEO STO ICO IDO and INO, please continue reading!

What are ICOs, IEOs, STOs, IDOs and INOs?

Cryptocurrencies are virtual digital assets that rely on blockchain technology, a decentralized and encrypted ledger that records all transactions conducted on the network. Cryptocurrencies enable their user community to engage in transactions without the use of traditional currencies and also fund innovative projects through cryptocurrency fundraisers.

A cryptocurrency fundraiser involves issuing tokens in exchange for cryptocurrencies. Tokens are digital units that represent a right or value associated with the funded project. There are various types of cryptocurrency fundraisers based on factors such as the nature of the tokens issued, the platform used for transactions, the involvement of trusted third parties, and the level of regulatory oversight. Let’s take a closer look at the main types of cryptocurrency fundraisers in Securing IEO STO ICO IDO and INO:

ICO (Initial Coin Offering)

An ICO is a fundraising operation in which a company issues tokens that investors subscribe to mainly with cryptocurrencies. These tokens can have different functions, depending on the project funded:

  • Utility tokens, which give access to a service or a platform developed by the company.
  • Governance tokens, which allow holders to participate in the strategic decisions of the project.
  • Security tokens, which represent a share of the capital or the revenues of the company.

An ICO usually takes place in several stages:

  • The presale, where investors can buy the tokens at a discounted price, often with a minimum amount required.
  • The public sale, where the tokens are made available to the general public, often with a maximum amount to be raised.
  • The distribution, where the tokens are sent to investors on their wallets..

The advantages of an ICO for investors are:

  • The possibility to support innovative and promising projects.
  • The possibility to benefit from a high capital gain if the project succeeds and the value of the tokens increases.
  • The possibility to diversify your portfolio with digital assets.

The disadvantages of an ICO for investors are:

  • The risk of losing all or part of your investment if the project fails or if the tokens lose their value.
  • The risk of falling for a scam or a fraud, as ICOs are poorly regulated and controlled. The risk of not being able to resell your tokens easily, as there is not always a liquid secondary market.Depending on the country where the ICO takes place, there may be rules to follow, especially in terms of investor protection, anti-money laundering or taxation. Therefore, it is advisable to check the legal status and the compliance of the ICO before investing. Some countries have banned or restricted ICOs, while others have issued guidelines or regulations to ensure their transparency and security.

IEO (Initial Exchange Offering)

An IEO is a fundraising operation in which a company issues tokens on a cryptocurrency exchange platform. The exchange acts as an intermediary between the company and investors, providing security, liquidity, and visibility for the token sale. Investors can purchase tokens using cryptocurrencies or fiat money, depending on the exchange.

An IEO typically involves a single stage:

  • Public sale: Tokens are sold on the exchange platform within a limited time frame and at a fixed price.

Advantages of IEOs for investors include:

  • Enhanced security, liquidity, and visibility compared to ICOs.
  • Access to vetted and quality projects that have been approved by the exchange.
  • Ability to trade tokens immediately after the sale on the same exchange.

Disadvantages of IEOs for investors include:

  • Dependence on a centralized intermediary that controls the token sale process and charges fees.
  • Need to comply with stricter rules and regulations imposed by the exchange and jurisdiction.
  • Risk of missing out on opportunities due to high demand and limited token supply.

STO (Security Token Offering)

An STO is a fundraising operation in which a company issues tokens that represent securities, such as shares or bonds. These tokens are backed by real assets, and investors can purchase them using cryptocurrencies or fiat money, depending on the platform.

STOs typically involve one or more stages:

  • Private sale: Accredited investors can buy tokens at a discounted price, often with a minimum investment requirement.
  • Public sale: Qualified investors can purchase tokens at a fixed price, often with a maximum fundraising amount.

Advantages of STOs for investors include:

  • Opportunity to invest in regulated and compliant projects that offer legal protection and transparency.
  • Potential for real value and returns from the underlying assets of the company.
  • Access to new markets and opportunities that were previously reserved for institutional investors.

Disadvantages of STOs for investors include:

  • Need for accreditation or qualification based on strict criteria set by regulators and platforms.
  • Lack of liquidity and availability compared to utility tokens or cryptocurrencies.
  • Complexity and cost associated with issuing and managing security tokens on blockchain platforms.

IDO (Initial Dex Offering)

An IDO is a fundraising operation in which a company issues tokens on a decentralized protocol for exchanging cryptocurrencies, known as a DEX (Decentralized Exchange). Investors can purchase tokens directly on the DEX without going through a centralized platform or intermediary.

Advantages of IDOs for investors include:

  • Speed and simplicity of the process, as it does not require identity verification or prior fund deposits.
  • Transparency and security of transactions, as they are conducted on the blockchain without reliance on a trusted third party.
  • Liquidity and accessibility of tokens, which are immediately available on the secondary market and can be exchanged for other cryptocurrencies.

Disadvantages of IDOs for investors include:

  • Technical and operational risks associated with decentralized protocols that may have vulnerabilities or bugs.
  • Regulatory and legal risks due to the lack of a clear and harmonized legal framework for cryptocurrency fundraisers.
  • Volatility and speculation risks arising from high demand and limited token supply.

INO (Initial NFT Offering)

An INO is a fundraising operation in which a company issues non-fungible tokens, called NFTs (Non-Fungible Tokens). NFTs are unique and indivisible digital assets that can represent works of art, collectibles, virtual or real goods. Investors can purchase NFTs using cryptocurrencies on specialized platforms.

Advantages of INOs for investors include:

  • Support for creative and original projects that leverage the blockchain’s potential to create value.
  • Possibility to benefit from exclusive and inalienable ownership rights over NFTs, certified by the blockchain and immune to duplication or falsification.
  • Opportunity to resell NFTs on a growing and demanding secondary market.

Disadvantages of INOs for investors include:

  • Risk of overvaluation and speculative bubbles due to the current frenzy around NFTs and their artificial scarcity.
  • Potential for counterfeiting and plagiarism, as effective legal protection for copyrights and trademarks is lacking.
  • Environmental and ethical concerns related to the high energy consumption and negative externalities generated by the blockchain.

Comparison Table of Different Cryptocurrency Crowdfunding Models

Below is a comprehensive table comparing different crowdfunding models in cryptocurrency:

Crowdfunding model Definition Advantages Disadvantages
ICO Fundraising in cryptocurrency by issuing tokens that can have various functions Support innovative projects, benefit from high potential gain, diversify portfolio Risk losing investment, fall for scam, not be able to resell tokens easily, face regulatory uncertainty
IEO Fundraising in cryptocurrency by issuing tokens on an exchange platform that acts as a trusted intermediary Benefit from better security, liquidity and visibility than ICOs, access a wider pool of investors and projects Depend on a centralized intermediary, pay higher fees, comply with stricter rules, face platform risk
STO Fundraising in cryptocurrency by issuing tokens that represent securities such as shares or bonds Invest in regulated and compliant projects, benefit from real value and returns, access new markets and opportunities, reduce intermediation costs Be accredited or qualified, face lack of liquidity and availability, deal with complexity and cost, follow different regulations depending on jurisdictions
IDO Fundraising in cryptocurrency by issuing tokens on a decentralized exchange protocol that eliminates intermediaries Enjoy speed and simplicity of the process, ensure transparency and security of transactions, access liquidity and accessibility of tokens Face technical and operational risk, cope with regulatory and legal risk, deal with volatility and speculation
INO Fundraising in cryptocurrency by issuing non-fungible tokens that represent unique and indivisible digital assets Support creative and original projects, benefit from exclusive and inalienable ownership of NFTs, resell NFTs on a growing and demanding market Deal with overvaluation and speculative bubble, encounter counterfeiting and plagiarism issues, consider environmental and ethical impact

Comprehensive Table of Blockchains Supporting ICOs, IEOs, STOs, IDOs, and INOs

Here is a table showcasing the support for ICOs, IEOs, STOs, IDOs, and INOs across different blockchains, focusing on Securing IEO STO ICO IDO and INO:

Blockchain ICO support IEO support STO support IDO support INO support BIP32 support BIP39 support BIP44 support
Ethereum Yes Yes Yes Yes Yes Yes Yes Yes
Binance Smart Chain (BSC) Yes Yes Yes Yes Yes Yes Yes Yes
Cardano (ADA) No No No Yes No Yes Yes Yes
Solana (SOL) Yes Yes No No No Yes No Yes
Avalanche (AVAX) Yes Yes Yes No No Yes Yes No
Cosmos (ATOM) Yes Yes Yes Yes Yes Yes Yes No
Algorand (ALGO) Yes Yes Yes Yes Yes Yes Yes No
Stellar (XLM) Yes No Yes No No Yes Yes Yes

What are seed phrases and private keys?

Seed phrases and private keys are essential for accessing and controlling your funds in cryptocurrency. If they are lost or stolen, you may permanently lose access to your cryptocurrencies.

Seed phrase

A seed phrase, also known as a secret phrase, is a sequence of words, typically consisting of 12 or 24 words, that allows you to restore your crypto wallet in case of loss or theft. These words are selected in a specific order from a dictionary containing thousands of words. The seed phrase is essentially a more human-readable representation of a private key and can generate an unlimited number of public-private key pairs.

The public key is the address to which you can receive cryptocurrencies on the blockchain, similar to an IBAN for a bank account. The private key enables you to control the funds associated with a public key and initiate transactions from that address. Public and private keys are always generated as pairs.

The seed phrase is crucial for accessing your wallet and funds, and it must be kept secure and confidential. If lost or stolen, there is no way to recover it or block access to your funds.

Private key

A private key is a string of random letters and numbers generated by your wallet when it is created. It is used for encrypting and decrypting data using public-key cryptography. The private key grants access to your funds and enables you to initiate transactions on the blockchain.

A private key looks like this: 5Kb8kLf9zgWQnogidDA76MzPL6TsZZY36hWXMssSzNydYXYB9KF

You should never share your private key with anyone or store it digitally or online. If your private key is lost or stolen, you will lose access to your funds permanently.

How to Secure Your Funds in Securing IEO STO ICO IDO and INO

To participate in an ICO, IEO, STO, IDO, or INO and ensure the security of your funds in Securing IEO STO ICO IDO and INO, you need a wallet that is compatible with the tokens being issued and the accepted cryptocurrency. There are different types of wallets available, each offering varying levels of security and convenience.

Online Wallets (Web Wallets): These wallets are accessible through a web browser. While they are easy to use, they are susceptible to hacking and theft. It is important to choose a reputable and secure online wallet.

Mobile Wallets: These wallets are installed on smartphones and provide convenience for daily transactions. However, they are vulnerable to malware and the risk of losing the phone. Ensure you have proper security measures in place for your mobile wallet, such as enabling device passcodes and biometric authentication.

Software Wallets: These wallets are downloaded and installed on a computer. They offer greater security compared to online or mobile wallets, but their reliability depends on the security of the hardware and software. Keep your computer updated with the latest security patches and use reputable wallet software.

Hardware Wallets: These physical devices are specifically designed for storing private keys. They provide the highest level of security by isolating private keys from the internet. Hardware wallets, such as Ledger or Trezor, are recommended for secure storage of your private keys in Securing IEO STO ICO IDO and INO.

Regardless of the type of wallet you choose, there are some basic rules to follow to secure your funds in Securing IEO STO ICO IDO and INO:

  1. Never share your seed phrase or private key with anyone, and avoid storing them digitally or online.
  2. Make a backup copy of your seed phrase or private key on a physical medium such as paper, metal, or plastic. Store them in secure locations.
  3. Use a strong password and PIN code to protect your wallet from unauthorized access.
  4. Regularly update your wallet software to fix any bugs or vulnerabilities.
  5. Utilize reputable antivirus and firewall software to protect your device from malware and hackers.

By following these security practices, you can significantly reduce the risk of losing your funds and ensure the safety of your investments in Securing IEO STO ICO IDO and INO.

Now, let’s explore how you can enhance the security and simplicity of your cryptocurrency transactions by using EviCore NFC HSM technology.

EviCore NFC HSM is a solution that safeguards your seed phrases and private keys in cryptocurrency using Near Field Communication (NFC) technology. With EviCore NFC HSM, you can store your seed phrases and private keys in an encrypted NFC tag or card, protected by a segmented key. This tag or card allows you to restore your wallet on any NFC-compatible device without exposing your sensitive data to the internet.

EviCore NFC HSM is compatible with major cryptocurrency wallets such as Ledger, Trezor, Metamask, Trust Wallet, and more. It also works seamlessly with popular cryptocurrency exchange platforms like Binance, Coinbase, and Kraken. This ensures optimal security and ease of managing your funds in cryptocurrency.

Here’s a step-by-step guide on how to use EviCore NFC HSM to secure your seed phrases and private keys in cryptocurrency:

  1. Download the application that incorporates the EviCore NFC HSM technology on your NFC-compatible Android smartphone.
  2. Pair the NFC HSM device with your smartphone using the unique pairing key.
  3. Translate to English: Add the seed phrase by simply clicking on the multi-language BIP39 words provided during the creation of your secure cryptocurrency wallet, without typing anything on the keyboard, as EviCore NFC HSM performs real-time checksum verification of the seed phrase before securely encrypting and storing it in the NFC device.
  4. You can also add the private key derived from the seed phrase without entering or scanning its QR code through the Android NFC application, which will automatically encrypt and store it in the NFC device in less than 5 seconds. You just need to indicate beforehand which blockchain your derived key belongs to before the registration pro

By utilizing EviCore NFC HSM, you can secure your seed phrases and private keys with maximum security and unparalleled ease of use. You no longer need to worry about losing or having your sensitive data stolen, as you can store them in a physical device that can be carried with you wherever you go. Additionally, you can securely share your seed phrases and private keys with others using encrypted RSA-4096 public keys or segmented key authentication, making it easier to transmit funds to your heirs.

EviCore NFC HSM technology is the ideal solution for securing your seed phrases and private keys in cryptocurrency, enabling you to fully embrace the opportunities offered by cryptocurrencies while minimizing unnecessary risks. If you’re interested in this innovative solution, visit Freemindtronic’s website or contact them for more information.

Additionally, if you’re seeking an alternative method to secure your crypto fundraising, you may consider EviCore HSM OpenPGP technology. This technology transforms your Android or iPhone into a hardware security module (HSM) for encrypting and storing your crypto keys. It leverages the highly secure OpenPGP standard, known for its reliability and security. To learn more about this technology and how it can help you safely fund your blockchain project, you can refer to this article link

Conclusion

In this article, we have provided insights into participating in various forms of cryptocurrency crowdfunding, including ICOs, IEOs, STOs, IDOs, and INOs. We have emphasized the importance of securing your seed phrases and private keys in Securing IEO STO ICO IDO and INO and introduced EviCore NFC HSM technology as a solution. By adopting EviCore NFC HSM, you can enhance the security and simplicity of your cryptocurrency transactions while mitigating risks. We hope this article has been informative and valuable to you. Should you have any questions or comments, feel free to leave them below.

Thank you for reading, and happy investing in Securing IEO STO ICO IDO and INO!

How BIP39 helps you create and restore your Bitcoin wallets

BIP39 EviSeed post Freemindtronic from Andorra web site

BIP39 by Jacques gascuel This article will be updated with any new information on the topic, and readers are encouraged to leave comments or contact the author with any suggestions or additions.  

BIP39: how to create and restore your Bitcoin wallets securely

Do you want to know how BIP39 helps you manage your cryptographic keys with a simple mnemonic phrase? Find out in this article how this standard works and how to use it to protect your bitcoins.

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How BIP39 helps you create and restore your Bitcoin wallets

Do you struggle to manage your cryptocurrency wallets? Are you looking for a simple and secure solution to create and restore your wallets? You are not alone. According to a study, more than 20% of cryptocurrency users have lost access to their funds because of a forgotten or stolen private key. Fortunately, there is an innovative solution to avoid this problem: BIP39 and mnemonic phrases. In this article, we will explain what BIP39 is, how it works, what are its advantages and disadvantages, and which wallets support it.

What is BIP39 and how does it work?

BIP39, also known as Bitcoin Improvement Proposal 39, proposes a novel method to simplify the creation and recovery of cryptocurrency wallets. It relies on the use of mnemonic phrases, which are sequences of words easy to remember generated from a predefined list of words. These mnemonic phrases serve to derive the private keys that allow you to access your funds. The use of this method greatly simplifies the management and backup of wallets, avoiding the need to memorize complex private keys.

BIP39 is part of the many BIPs (Bitcoin Improvement Proposals) that aim to improve the Bitcoin protocol. It was proposed in 2013 by Marek Palatinus, Pavol Rusnak, Aaron Voisine and Sean Bowe. It was implemented on Bitcoin in 2014 and has been adopted by many other cryptocurrency projects since then. You can consult the official document of BIP39 here (link to https://github.com/bitcoin/bips/blob/master/bip-0039.mediawiki).

The benefits of BIP39

BIP39 has many benefits for cryptocurrency users. First of all, it simplifies considerably the process of creating and recovering wallets. Thanks to mnemonic phrases, it becomes easier to backup and restore your wallets in case of need. Moreover, these mnemonic phrases are generally more user-friendly, as they are composed of words in natural language, which makes them easier to remember.

Another important benefit is compatibility. Many hardware and software wallets support BIP39, which offers great flexibility in choosing the wallet suitable for your needs. Whether you prefer a physical wallet or a software solution, there is a high chance that you can find a wallet compatible with BIP39.

The drawbacks of BIP39

Despite its many benefits, BIP39 also has some drawbacks. The main drawback lies in the security of the mnemonic phrase. Given that the mnemonic phrase is the key to access your funds, its loss or theft can result in the total loss of your cryptocurrencies. It is therefore crucial to take appropriate security measures to protect your mnemonic phrase, such as secure backup in an offline location.

Another drawback is the dependence on wallet software compatible with BIP39. It is important to verify that the wallet you use supports BIP39 before generating your mnemonic phrase. Otherwise, you may not be able to access your funds with another wallet that uses the same protocol.

Cold wallet vs hardware wallet: what’s the difference?

If you own cryptocurrencies, you need a wallet to store and manage them. But not all wallets are the same. In this article, we will explain the difference between a cold wallet and a hardware wallet, and how to choose the best one for your needs.

What is a cold wallet?

A cold wallet is a type of hardware wallet that is very secure: it never interacts with any smart contract or external source; it only stores assets and executes transfers between your other wallets. For example, a hardware wallet that is not used to explore Web3 can be considered a cold wallet.

What is a hardware wallet?

A hardware wallet is a physical device that stores your private keys in an isolated environment from an internet connection. This is important, because anyone who has access to your private keys has access to your crypto. A hardware wallet also allows you to sign transactions; enabling you to interact with different blockchain networks.

What is the difference between a cold wallet and a hardware wallet?

The main difference between a cold wallet and a hardware wallet is the level of interaction with smart contracts and external sources. A cold wallet is safer than a hardware wallet active online, because it does not face any threat from interactions with smart contracts.

Here is a summary table of the advantages and disadvantages of each type of wallet:

Cold Wallet Hardware Wallet
+ Very secure + Secure
+ Ideal for long-term storage + Ideal for Web3 exploration
– Not convenient for frequent transactions – Less secure than a cold wallet
– Can be lost or damaged – Can be hacked by malicious smart contracts

What standard is used to generate the mnemonic phrase or mnemonic code?

Another important aspect to consider when choosing a wallet is the standard used to generate the mnemonic phrase or mnemonic code. This is a group of easy-to-remember words that serves as a backup for your wallet in case of loss or destruction. The most common standard is BIP39, which is used by many deterministic (HD) wallets and not only by Bitcoin wallets. It has also been adopted for use in many other cryptocurrency projects.

Cold wallets and hardware wallets generally use BIP39 for master key generation. Some hardware wallets also use other BIPs to improve the security and functionality of their wallets. For example:

  • The Trezor Model T uses BIP32, BIP39, BIP44 and SLIP39. SLIP39 is an improvement of BIP39 that allows creating split backups (Shamir Backup) for increased security.
  • The Coldcard uses BIP32, BIP39 and BIP174. BIP174 is a standardized format for partially signed transactions (PSBT) that allows signing transactions offline.

What are the different types of cold wallets and hardware wallets?

There are different types of cold wallets and hardware wallets, and some can belong to both categories. For example, the Keepser is an NFC cold wallet that uses BIP39 to save seed phrases generated by other wallets or blockchains. It is therefore a type of hardware wallet that comes in the form of a contactless card that communicates with an application on your smartphone. The Keepser only protects cryptocurrency private keys, and not other types of private keys. It also allows printing private keys and seed phrases in the form of encrypted QR codes, which can be scanned by the Keepser application to restore wallets. The Keepser uses EviVault and EviSeed technology developed by Freemindtronic, a company specialized in cybersecurity and custom product design.

It is therefore important to check what standards are supported by the wallet you choose and how they affect the security and compatibility of your wallet.

BIP39 EviSeed post Freemindtronic from Andorra web site

How to choose a BIP39-compatible wallet

Update 29/05/2023

To fully enjoy the benefits of BIP39, it is essential to choose a wallet compatible with this feature. Many hardware and software wallets support BIP39, offering a simplified and secure experience. To help you in your choice, we have created a comprehensive table that compares the best wallets compatible with BIP39:

How to secure your mnemonic phrase with EviSeed?

If you use a BIP39-compatible wallet, you must imperatively protect your mnemonic phrase against any loss or theft. An innovative solution for this is EviSeed, developed by Freemindtronic. EviSeed is an electronic device that allows you to store your mnemonic phrase in a secure and resistant NFC card against physical or logical attacks.

EviSeed offers several advantages over traditional backup methods on paper or metal:

  • It is easy to use: just approach your NFC card from a compatible smartphone to display your mnemonic phrase.
  • It is secure: it uses a patented algorithm that encrypts your mnemonic phrase with a personal PIN code.
  • It is durable: it resists shocks, water, fire and magnetic fields.

EviSeed is compatible with all wallets that support BIP39, such as Ledger, Trezor or Metamask. You can order your EviSeed on Freemindtronic’s official website (link to https://freemindtronic.com/eviseed/en/).

Some real-life examples of people who lost their keys

You may think that losing your mnemonic phrase is a rare or unlikely case. Think again! Many people have already experienced this misadventure, sometimes with dramatic consequences. Here are some real-life examples taken from the media:

  • Stefan Thomas, a programmer living in San Francisco, owns 7 002 Bitcoin that he cannot recover because he lost the password of his IronKey hard drive, which contains the private keys of his wallet1. He only has two attempts left before his hard drive locks permanently.
  • James Howells, a British computer scientist, accidentally threw away his hard drive containing 7 500 Bitcoin in 20132. He tried unsuccessfully to find his hard drive in a municipal landfill.
  • Brad Yasar, an entrepreneur living in Los Angeles, mined thousands of Bitcoin at the beginning of the project3. But he forgot his passwords and failed to access his wallets despite hundreds of hours spent trying.
  • Luke Dashjr, one of the original developers of Bitcoin Core, said he lost more than 200 Bitcoin after his PGP key was compromised on December 31, 20224. He claimed he did not know how hackers were able to access his key.

These examples show well the importance of using a reliable and secure method to backup your mnemonic phrase. With EviSeed, you can avoid this kind of situation and enjoy your cryptocurrencies peacefully.

Other standards related to BIP39

BIP39 is not the only standard that concerns the generation and management of cryptocurrency wallets. There are other standards that are related to BIP39 or that propose alternatives to it. Here are some examples:

  • The BIP32 is another standard that describes how to generate deterministic wallets from a master key. The BIP32 allows creating a hierarchy of derived keys from a single master key, which facilitates the organization and backup of wallets. The BIP32 uses a hash function to derive keys, which ensures that keys are unpredictable and independent from each other. The BIP39 is a method to create a master key from a mnemonic phrase. The two standards are often used together to create deterministic wallets from mnemonic phrases.
  • The BIP44 is an extension of the BIP32 that defines a hierarchical structure for deterministic wallets. It allows managing multiple accounts and multiple currencies with a single mnemonic phrase. The BIP44 defines five levels of derivation: purpose, currency, account, address type, and address index. The purpose is fixed at 44’ to indicate that the wallet follows the BIP44. The currency is a numerical code that identifies the currency used (for example, 0’ for Bitcoin, 60’ for Ethereum). The account is a number that allows separating funds according to personal criteria (for example, 0’ for the main account, 1’ for the secondary account). The address type is a bit that indicates if the wallet uses external addresses (0) or internal addresses (1). External addresses are those that are used to receive payments, while internal addresses are those that are used to send changes. The address index is a number that identifies each address within the address type. For example, the address m/44’/0’/0’/0/0 corresponds to the first external address of the first Bitcoin account of the wallet.
  • The SLIP39 (Shamir’s Secret-Sharing for Mnemonic Codes) is an alternative to BIP39 that allows splitting a mnemonic phrase into several parts that must be combined to restore the master key. The SLIP39 uses Shamir’s secret-sharing scheme, a cryptographic algorithm that allows distributing a secret into several pieces, called shares, such that a minimum number of shares is required to reconstruct the secret. For example, one can split a mnemonic phrase into five shares, of which three are required to restore it. This allows increasing security and redundancy of the wallet, by avoiding that one single share is enough to access funds or that one single share lost makes the wallet irrecoverable.
  • The Electrum Seed Version System is a system used by Electrum wallet to generate and verify mnemonic phrases. It differs from BIP39by several aspects: it uses a different word list, it does not use a checksum but a version code, it allows generating mnemonic phrases of variable lengths (12, 18 or 24 words), it allows deriving keys and addresses from a hash of the mnemonic phrase without depending on a fixed word list, it supports different types of mnemonic phrases according to the type of wallet (standard, multisig or segwit).
  • The Monero Seed Format is a format used by Monero wallet to generate and verify mnemonic phrases. It differs from BIP39 by several aspects: it uses a different word list, it uses a different checksum based on CRC32, it allows generating mnemonic phrases of 13 or 25 words depending on the seed length (128 or 256 bits), it allows deriving keys and addresses from the seed without depending on a fixed word list.

The segmented key authentication technology

Another innovative technology that allows to protect sensitive data such as mnemonic phrases by using encryption keys that are stored on different supports is the segmented key authentication technology. This technology was invented by Jacques Gascuel, a Frenchman living in Andorra, founder of the Andorran company Freemindtronic, is also patented in the USA under number US11281759B2 in 2020.

According to the invention, the encryption keys of the mnemonic phrases are segmented into several parts, which allows to store them on different supports such as contactless devices, phones, computers or a paper print with a QR code. Each mnemonic phrase is associated with an NFC HSM device and/or an EviCore OpenPGP HSM from Freemindtronic, which contains a part of the encryption key, which can be a pairing key. This part allows to decrypt the mnemonic phrase when the other parts are gathered. The other parts can be validated in different ways, such as a password, a fingerprint, a geofence or an identifier of the phone or network, etc. The technology allows to create different segmentation combinations for each mnemonic phrase. To reconstruct the encryption key and access the mnemonic phrase, one must approach the NFC HSM device from the phone and validate the other parts according to the order chosen by the user or automatically if all conditions are met.

According to one of the implementations of the invention, the key segments chosen by the user to constitute the decryption key can be of physical or digital origin. For example, the user can choose a key segment that corresponds to a geofence, thus allowing to decrypt the mnemonic phrase without requiring any other action, apart from being physically in the right geographical area. Of course, this key segment is associated with at least another key segment, such as the identifier of the user’s phone. This greatly improves user experience without compromising security level, as there are other default authentication factors integrated into NFC devices, such as also segmented pairing key, NFC identifier, unique 128-bit key, administrator and/or user password, as well as phone fingerprint.

Finally, an advantage of this technology is that key segments can be entrusted to various third parties without any risk. For example, a third party can hold a key segment without knowing what type of segment he owns, whether it is a BSSID, a geofence or a phone identifier that will receive a donation. There is virtually no limit to this. It is an effective solution for donations and inheritances, where the notary or lawyer can have a geofence key segment that he can only use in a specific place defined in a will or under the supervision of a bailiff.

Conclusion

In summary, BIP39 is a major improvement proposal to simplify the management of cryptocurrency wallets. Thanks to the use of mnemonic phrases, it offers a user-friendly and secure solution to create and recover your wallets. However, it is crucial to protect your mnemonic phrase against any loss or theft, and to choose a reliable and compatible wallet with BIP39.

We hope that this article has helped you understand better the functioning and benefits of BIP39. If you have any questions or comments, we would love to help you in the section below. Simplify your cryptocurrency management experience with BIP39!