While utilizing cryptocurrencies for the first time, one of the concerns that first-time users have is whether or not their assets will be safe. To hold digital currencies, as opposed to fiat money, which may be kept in a traditional wallet, one has to make use of a digital wallet, which is less common.

 

In addition, as blockchain technologies become more widely used, hackers are finding digital wallets to be a more enticing target.

 

A new cold wallet model may solve the mnemonic phrase dilemma by providing an alternative method for securely storing private keys without relying on a seed phrase.

 

Instead, this new model uses a combination of biometrics and cryptography to generate and store private keys, eliminating the need for a seed phrase.

 

With this new model, the user's private key is generated using a unique algorithm that takes into account the user's biometric data, such as their fingerprint or facial recognition.

 

The private key is then encrypted and stored securely on the device, which can only be accessed with the user's biometric data. This means that even if the device is lost or stolen, the private key cannot be accessed by anyone else without the user's biometric data.

 

This new cold wallet model has the potential to solve the mnemonic phrase dilemma by providing a more secure and convenient method for storing private keys.

 

By eliminating the need for a seed phrase, users no longer have to worry about securely storing and accessing their seed phrase.

 

Additionally, using biometric data to secure the private key provides an added layer of security, making it more difficult for hackers to access the private key. The details are as follows:

Safety Concerns

Regrettably, when it comes to safety, users of cryptocurrencies need to educate themselves not only on how to safeguard their holdings but also on how to prevent their passwords and mnemonic phrases from being lost or stolen.

 

The most straightforward approach to recovering a misplaced private key is to use a mnemonic phrase, which is also referred to by its other name, the seed phrase.

 

The multi-word secret restoration phrase then becomes the master key that produces all the encryption information for users’ wallets, which gives access to their crypto money.

 

To allow transactions and verify ownership of the assets kept in a user's wallet, it is required for the user's wallet to include a unique private key for each crypto address that the wallet contains.

 

However, this has the unfortunate side effect that anybody who has access to the recovery phrase may quickly clone a user's account and spend all of the money that is in it. This is a double-edged sword.

 

Hence, one of the primary concerns that first-time cryptocurrency users have is how they can ensure their privacy and safety at all times while using cryptocurrencies.

What is Mnemonic Phrase Dilemma?

The issue of correctly preserving and protecting the 12, 18, or 24-word phrase that is needed to produce a bitcoin wallet's private key is referred to as the mnemonic phrase dilemma.

 

This phrase, which is sometimes referred to as a seed phrase, is necessary for regaining access to a wallet in the event that the wallet itself is misplaced or that the device on which it is kept is corrupted or stolen.

 

The problem occurs due to the fact that it is very necessary to store the mnemonic phrase in a safe area. However, if the phrase is not immediately available, the owner of the wallet runs the danger of losing access to their cash.

 

On the other hand, if the phrase is not well protected, it may be taken by another person or accessed by a third party, which will result in a loss of financial resources.

 

It is advised that users of wallets employ a safe, offline storage solution for their seed phrases, such as a digital wallet or a paper backup. This will help limit the risks associated with this conundrum.

 

In the event that the phrase is required to regain access to the wallet, it is imperative that it be stored in a position that is both safe and easy to get to in case it is required.

 

To further strengthen the protection provided by the wallet, it is suggested that the seed phrase be kept a secret at all times and that extra security precautions, such as two-factor authentication and robust passwords, be used.

Seed Phrase Encryption

For this reason, many users choose to encrypt their seed phrases, append a word to them, separate their multi-word seed phrase into sections, or store separate portions of this recovery code in other locations.

 

On the other hand, these approaches are not foolproof and, on the whole, they are somewhat inconvenient.

 

Since humans are not flawless, are prone to making errors, and have a tendency to look for just the simplest answers, keeping seed phrases becomes a significant obstacle to the continued use and acceptance of cryptocurrencies.

 

In order to get over this obstacle, a certain firm that sells hardware has come up with an innovative replacement for the mnemonic phrase difficulty.

The New Model For Encryption

The backup of a user's private key does not rely on a seed phrase in the new model for cold wallets that have been developed. Instead, safe copies of the key are made on individual playing cards that come in sets of three.

 

Moreover, the private key is produced within the wallet chip based on the entropy from the hardware random number generator. This virtually removes the need for the mnemonic phase setup that the majority of wallets now employ.

 

According to this idea, even if a wallet is misplaced or stolen, the owner will still have access to their assets since they will still be in possession of two or three of the other cards in the wallet.

 

One card may be used as the primary cryptocurrency wallet, another can be discreetly concealed, and the third card can either be stored in a safe or distributed to members of the family. Due to the fact that each card has its own unique password, there will be no issues even if one of the cards is misplaced or stolen.

 

Moreover, using this model, it becomes virtually hard to break the password by using force or a guessing method. This is because systems may be set up in such a way that when a password is an input incorrectly after the sixth try, the following attempt delay is extended by 1 second for each failed attempt, up to a maximum of 45 seconds.

 

This makes it nearly impossible to crack the password. The advantage is that, in contrast to a wallet that is safeguarded with a seed word, this contemporary option gives extra protection to users of all skill levels, making it suitable for both novices and seasoned pros.

The Protocol

This concept is now being piloted by Tangem, which is a firm that presently has and sells a hardware cold-wallet technology for the purpose of protecting bitcoin holdings. The team prides itself on providing a user experience that is both straightforward and safe in each of the 170 countries in which the firm is active.

 

Moreover, Tangem is the first firm to effectively apply the notion of a seedless wallet. This accomplishment sets them apart from their competitors.

 

Tangem is aware that there is no such thing as complete safety in hardware wallets until dependability is there. As a result of the fact that users are required to back up their private key in the event that a device fails, leaves the door open to new vulnerabilities.

 

Every card contains a microcomputer chip that has been approved by Common Criteria at the EAL6+ level. This is the same degree of chip protection as is found in diplomatic passports. As a consequence of this, the card is resistant to damage from elements such as dirt and moisture, and it also has a lifetime of more than 25 years.

 

The technology that permits bitcoin transactions using a smartphone essentially precludes the chance of any further failures since there is nothing to damage - thanks to the combination of a secure element (SE) chip and an NFC antenna.

Take Away

As for 14DigitalXchange this new cold wallet model may be of interest to them as it provides their users with a more secure and convenient way to store their cryptocurrency.

 

By promoting the use of this new cold wallet model, 14DigitalXchange can help its users avoid the risks associated with storing seed phrases, such as the risk of loss or theft.

 

Additionally, by offering support for this new cold wallet model, 14DigitalXchange can position itself as a leader in the cryptocurrency industry by providing its users with the latest and most secure technology.

 

If you want more information or news on the subject of cryptocurrency, reach out to 14DigitalXchange now - and read the news section.