Your crypto wallet is old tech but you just don’t know it yet. It is difficult to use and you probably hate having to worry about it. It is unlikely that Grandma is going to be able to figure out how to use it either. Lucky for us, it is already obsolete technology. But before I describe the next evolution of blockchain tech, it’s good to understand a bit of crypto history.
Not your keys, not your coins
The majority of crypto novices keep their coins on an exchange. The exchange is where they bought their coins, so it seems reasonable to think that their coins are safe there. This is how regular banks or stock exchanges work, so this is what everyone is used to. It is better to keep our cash in the bank than under our mattress, right? But crypto is not cash, and most people who think this way were probably not involved in the early days of bitcoin and have never heard of Mt. Gox.
Launched in 2010, Mt. Gox was one of the first bitcoin exchanges in existence, handling over 70% of bitcoin transactions worldwide. In 2014, it abruptly ceased operations among a slew of controversies which included lost or stolen coins, security breaches, and allegations of fraud. In February 2014, all withdrawals were halted, trading was suspended, and the website even went offline, leaving many customers wondering about the fate of their bitcoins. Mt. Gox got hit with multiple lawsuits and it eventually filed for bankruptcy. Anyone who experienced this disaster firsthand understands the concept of “not your keys, not your coins”, and knows the risks of keeping coins on an exchange.
Fast forward to the present, and we can see history repeat itself with the popular crypto trading platforms Celsius and Voyager, who both filed for bankruptcy after a tumble in the crypto market, leading to frozen withdrawals for its unfortunate customers. These investors learned the painful lesson that while bank deposits of fiat currency are insured by the FDIC, cryptocurrency holdings are not. Once again, “not your keys, not your coins”.
For those that have learned the lesson of not trusting their cryptocurrency with a third party, but still seek the convenience of being able to actually use their coins on a regular basis, they might decide to use a software wallet like Metamask. These types of wallets (also known as “hot wallets”) allow people to control their own coins by creating a “wallet” on their computer or smartphone. This digital wallet is known as the wallet.dat file.
Protecting your keys
Newcomers to crypto may assume that you save the coins on your computer, but this is not true. The coins always stay on the blockchain. What you control are your private keys, and the wallet.dat file contains the private keys that unlock the “vault” to your coins. The keys can only be accessed on a device where the wallet.dat file is located, and a person would enter their login and password to access them. So the wallet.dat file allows you to essentially “carry” your coins with you, on a device of your choosing.
This is a step up from keeping coins on an exchange, but there still remains the problem of security. Just do a quick internet search for “Metamask hack”, and you will find a long list of stories of people losing their coins due to hackers being able access that wallet.dat file to steal their private keys. As long as your computer is connected to the internet, even an encrypted wallet.dat file is vulnerable to easily obtainable malware. It’s the same story for all software wallets since they all use this file, and millions of dollars’ worth of crypto have been stolen by predatory hackers because of this.
One way of protecting your wallet.dat file is to keep it offline. Any crypto veteran with significant holdings understands this and will purchase a hardware wallet like a Trezor or Ledger to store the majority of his/her keys. This is referred to as “cold storage”, because the private keys are kept off the internet and away from the reach of potential hackers. However, in order to make any transfers, you would eventually need to connect this offline wallet to the internet first. In the end, if you want to actually spend your coins regularly, you still need to transfer to a “hot wallet” first so you can connect with other people. Afterall, a digital currency with no internet connection is pointless. With a wallet.dat file, you are forced to trade security for convenience if you want to make any transactions.
Many experienced crypto users will get around this problem by using a software wallet for small amounts of “spending money”, and keep the majority of their holdings offline. This is comparable to keeping most of your cash in a safe at home, and just carrying around a small amount of cash with you. This is a reasonable workaround. But what if you couldn’t access your safe? Or it somehow got lost or stolen? This situation is certainly not inconceivable considering that approximately 20% of the bitcoin in circulation is held in lost wallets. Unless you have security guards or you are a dragon, you may not be completely comfortable with having the sole responsibility of protecting your life savings.
If the idea of having to store your coins on a device that can potentially be lost or stolen gives you anxiety, then you are probably not alone. Wouldn’t it be great to have a wallet that you don’t have to physically store or carry around, can access with just your login credentials, and not have to worry about being hacked? Is that too much to ask from the future of digital currency?
No keys, no problem
That is where the Nexus Signature Chain comes in (not to be confused with other “signature chains”). The Signature Chain (also known as a Sigchain) does not use a wallet.dat file and it does not store your private key anywhere. The fact that there is no private key to steal, means there is one less avenue to be hacked. The Sigchain is a decentralized login system where your login credentials essentially become the “key” to a virtual space that you own. So instead of storing your keys on a physical device, you are essentially storing them in your brain by memorizing them.
You may be wondering how this is different from memorizing the login credentials to a software wallet. This is where the average user may not understand why the Sigchain is a game changer, because on the surface, the Nexus wallet may look like any other app that you log into. The difference here is that with a typical software wallet, your login credentials give you access to your private keys that are stored locally on your computer. With a Sigchain, your login credentials create one time use keys that give you access to a quantum resistant, personal blockchain on the Nexus network. This is why it is called a decentralized login system.
Nexus is the only blockchain system that is designed this way. Its decentralized nature means that it can be accessed securely from any computer, not just your own. With traditional software wallets, if you lose your smartphone, you need to make sure you have a backup of that wallet.dat file or you need to find that piece of paper with your recovery phrase. With Sigchains, this is not a problem. You can just login with another phone.
If you happen to forget your login credentials, you can still access your Sigchain through a recovery phrase. Similar to traditional wallets, this recovery phrase can be randomly generated and written on a piece of paper if you’d like. But if you prefer to have a phrase that is more easily remembered, Nexus allows you to create one yourself. I have chosen the words to a song as my recovery phrase, so I can recall them without having to write them down anywhere. Having options like this is what often sets Nexus apart from the crowd.
The decentralization of the internet
Nexus is not just a cryptocurrency, and the Sigchain is much more than just a wallet. Nexus is the decentralization of the internet itself, and the Sigchain is your access point. Everything we use the internet for now, we will use Nexus for, except there won’t be a middleman. The Sigchain will be a digital ID to access all decentralized apps that are created on the Nexus blockchain. We will no longer have to memorize (or continually forget and reset) countless passwords for different apps. We will be able to use it for a peer-to-peer messaging system, and we can configure it to eliminate annoying spam. We will use it to make peer-to-peer transactions online without the need for third party verification.
Sigchains will also change how we view the cloud. We will be able to login to any computer in the world using our Sigchain and have access to all our files that are stored on a decentralized cloud. All the computers of the world will essentially become one shared computer that can be accessed anywhere. Even someone who doesn’t own their own computer would be able to save files and access them on this shared computer. This is the Nexus vision of Web 3.0.
You may wonder if all this sounds too good to be true, if it is actually as secure as it claims to be. This is a highly technical question, and it remains to be seen. To this date, a Nexus Sigchain has never been hacked. It uses quantum resistant cryptography, making it more future-proof than blockchains that don’t. As the popularity of Nexus grows, more hackers will try, and this is the only way we will truly know, through rigorous testing.
Although many might disagree, the blockchain industry is still in its infancy. There are many projects out there that assume that blockchain technology is secure, and this false sense of security can lead to real people losing their life savings. Someone can create the most wonderful decentralized app, but without adequate security, it is like building a fancy skyscraper on a foundation of sand. This is why Nexus has spent the last 8 years building a foundation that will last, like the ancient stone pyramids that have stood for thousands of years. Only then will humanity be able to build on top of a solid infrastructure and use blockchain for what it was meant to be used for: freedom from centralization.
For a more technical explanation of Sigchains here, go here:
https://docs.nexus-interactions.io/technology/nexus-innovations/signature-chains
About the Author
Based in the U.S., Philip Lee volunteers as an Ambassador for Nexus.io. He is an attorney and registered nurse, as well as a permaculture and blockchain enthusiast. Being a decentralization maximalist, he seeks to strengthen local economies through the use of peer 2 peer marketplaces. All opinions are his own.
