Monday, March 12, 2012
For example, the phrase must be sufficiently long (12 words or more) to prevent a brute force guessing attack, such as "I went seeking freedom, but all the world's islands were already taken." It is further suggested not to use a simple phrase or a phrase taken from existing literature because it is more likely to be hacked by a computer that systematically attempts all phrases, similar to a dictionary attack. You want a high level of word entropy. Seemingly random modifications of the phrase would aid in strengthening brainwallet, such as "I went seeking freeeedom, but all the world's issslands were alreaDy taken." These simple changes make the entire phrase very difficult to predict.
Next, the phrase itself without the quotation marks is turned into a 256-bit private key with a hashing or key derivation algorithm. Completing this process turns my secret phrase into the 64-character hexadecimal key shown below (this should be kept secret also):
Now, you are ready to receive bitcoin from anywhere in the world and have the peace of mind that the corresponding private key to unlock, access, and transfer those bitcoin resides solely in your brain. If you forget the phrase or if you die suddenly, the bitcoin is lost and unrecoverable just like if you had burned cash. You can even memorize multiple phrases for multiple accounts, like casual spending and nest egg savings. Why is this so profound?
For starters, it represents the ultimate in mobile money. You have complete financial privacy and asset protection combined with the ability to have those assets fully accessible from anywhere in the world provided there is Internet connectivity or a telephone. You are also protected from theft or confiscation unless a legal jurisdiction can force you to reveal your bitcoin private key that isn't even known to exist. Possible applications include revealing the secret phrase to a loved one for inheritance reasons or even splitting the phrase into segments with each family member possessing a portion of the total phrase. Off-grid transactions are also possible by simply conveying the phrase via voice or encrypted email. It would also be possible to send bitcoin immediately to someone without an existing address because one could easily be created based on a selected phrase.
It may be awhile before this practice is commonplace since most people do not use bitcoin on a regular basis and most of those do not generate deterministic keys holding $1 million. But, it sure beats lugging around 17 kilos of gold bullion.