how electrum wallet encryption works

Electrum wallet employs multi-layered encryption using AES-256 and bcrypt to safeguard private keys, with a seed for wallet recovery and enhanced features like multi-pass encryption and secure library usage.

Oct 30, 2024 at 03:43 am

Understanding Electrum Wallet Encryption

1. Key Generation:

   • When you create a new Electrum wallet, it generates a private key and a public key.
   • The private key is stored on your device and is what you use to sign transactions.
   • The public key is derived from the private key and is what is used to receive cryptocurrency.

2. Encryption of Private Key:

   • Electrum uses a combination of two encryption methods: AES-256 and bcrypt.
   • The private key is encrypted using AES-256 with a password you set.
   • The password is then hashed using bcrypt to further strengthen the encryption.

3. Seed Generation:

   • Electrum also generates a "seed," which is a series of words that can be used to recover your wallet if it is lost or damaged.
   • The seed can be thought of as a master password for your wallet and must be kept secret.

4. Encrypted Seed Storage:

   • The seed is encrypted using the same AES-256 and bcrypt methods as the private key.
   • The encrypted seed is then stored on your device in a file called "wallet.dat."

5. Wallet Recovery:

   • If you need to recover your wallet, you will need the seed and the password you set.
   • By entering the seed and password into a new Electrum wallet, you can recover your funds and transaction history.

Enhanced Encryption Features:

• Multi-pass Encryption: Electrum performs multiple rounds of encryption to increase the security of your wallet data.
• Derivation Function: The seed is used to derive the encryption key for the private key, using a secure derivation function (e.g., PBKDF2).
• Use of Secure Libraries: Electrum utilizes reputable and well-tested cryptographic libraries (e.g., OpenSSL) to ensure the reliability of its encryption mechanisms.

Conclusion:

Electrum wallet encryption provides robust protection for your cryptocurrency funds. By employing multiple encryption layers and secure key generation methods, it ensures the privacy and security of your assets. Always keep your password and seed secret to maintain the integrity of your wallet.