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Understanding Smart Contract Development and Web3 Wallets

Session 2

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Coming up…

1:00 PM	Understanding public key cryptography & digital signatures
1:15 PM	Evolution and Types of web3 wallet
1:30 PM	Setting up a web3 wallet
1:50 PM	Introduction to smart contract development
2:20 PM	Break
3: 00 PM	Introduction Smart Contract Security

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Understanding public key cryptography & digital signatures

Definition : Cryptography is the practice of developing and using coded algorithms to protect and obscure transmitted information so that it may only be read by those with the permission and ability to decrypt it. Put differently, cryptography obscures communications so that unauthorized parties are unable to access them. - IBM

Types

Symmetric Cryptography
Asymmetric Cryptography

Introduction to Cryptography

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Understanding public key cryptography & digital signatures

Source - Grokking Bitcoin

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Evolution of web3 Wallets

“At a high level, a wallet is a software application that serves as the primary user interface to Ethereum. The wallet controls access to a user’s money, managing keys and addresses, tracking the balance, and creating and signing transactions” - Mastering Ethereum

Need of Web3 wallets

Storing private key securely
Multi Chain asset management
Better UX / DevX for interaction with dapps

Source - 101blockchains.com

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Types of Wallets

Hot Wallets

Browser Wallets - Metamask
Desktop Wallets - Electrum
Mobile Wallets - Trust

Cold Wallets

Hardware Wallets
Paper Wallets

Security Comparison: Cold wallets offer superior security with offline storage, minimizing risk of cyber attacks.

Accessibility Aspect: Hot wallets provide instant access for frequent transactions, ideal for daily use.

Convenience Consideration: Cold wallets are convenient for storing large amounts securely over time.

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Types of Wallets

Custodial Wallets

Third party (usually a crypto exchange) is responsible for managing your private keys.
Easy recovery in case user forgets the password
Better UX since no signatures are required from user again and again
Loss / blocking of funds in case of third party crisis or bankruptcy. Eg - FTX, Vauld

Non - Custodial or Self Custodial Wallets

Owner is responsible for for storing and managing your private keys
Recovery not possible in case private keys / seed phrase is lost.
User needs to sign for every onchain action affecting UX
No need to trust any third party

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Types of Wallets

Smart Contract Wallets

Programmable wallets built on top of smart contracts ie smart contracts are used to manage assets on blockchain.
Enables features like social recovery, threshold signatures etc
Usually more gas expensive since every transaction is called by smart contracts. Eg - Safe, Argent wallet etc.

Multi Party Computation ( MPC ) Wallets

Uses MPC technology to secure cryptocurrency transactions by splitting the private key across multiple parties. No single party can access the complete key alone, requiring collective authorization for transactions.
Reduces risk by distributing key management.
Low transaction costs as compared to smart contract wallets

Account Abstraction - Moving away from EOA’s

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Setting up a Web3 Wallet

Setting up Metamask
Adding different chains
Sending transactions
Adding custom tokens
Interacting with blockchain using explorer and dapps

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