ETH Cold Wallet Implementation Guide

Introduction

Blockchain wallets fall into two primary categories: cold wallets and hot wallets. In simple terms, a cold wallet stores data locally, while a hot wallet relies on server-side storage. This guide explores cold wallet implementation, key functionalities, and best practices.

Key Tools & Libraries:

• bip39: Generates mnemonic phrases (seed phrases).
• ethereumjs-wallet: Creates, imports, and exports wallets.
• ethereumjs-tx: Signs transactions.
• ethereumjs-util: Integrates essential Ethereum functions.
• crypto-js: Provides encryption capabilities.

Core Concepts in Blockchain Wallets

Understanding these components is critical:

1. Mnemonic Phrase: A human-readable backup for wallet recovery (e.g., "zoo zoo zoo ...").
2. Private Key: A 256-bit number granting control over wallet funds.
3. Public Address: Derived from the private key (e.g., 0x7F3a...).
4. KeyStore File: Encrypted private key (requires a password).

Relationships:

• Mnemonic → Private Key (one-way derivation).
• Private Key → Public Address (one-way derivation).
• Password + Private Key ↔ KeyStore (two-way encryption/decryption).

Wallet Functionalities

1. Creating a Wallet

Workflow:

1. Generate a random mnemonic via bip39.
2. Derive the private key using the mnemonic.
3. Encrypt the private key with AES (using a user-defined password).
4. Store encrypted data in localStorage alongside wallet metadata.

👉 Learn more about secure key management

2. Importing a Wallet

Supported methods:

• Mnemonic: Regenerate the private key.
• KeyStore: Decrypt using the password.
• Private Key: Directly import (least secure).

3. Wallet Management

Security Note: Passwords cannot be retrieved; only reset.
Verification Process:

1. Decrypt the stored encrypted private key using the input password.
2. Compare the derived address with the original.
3. If matched, proceed with operations (e.g., exporting keys).

4. Transactions & Receiving Funds

• Sending ETH: Sign transactions via ethereumjs-tx.

  • Gas Fees: Calculated as gasPrice * gasLimit (1 ETH = 10⁹ Gwei).
• Receiving ETH: Share your public address or QR code.

👉 Optimize gas fees for transfers

FAQs

Q1: How secure are cold wallets?

Cold wallets are offline by design, minimizing exposure to hacks. Always back up mnemonics securely.

Q2: Can I recover a lost password?

No. Passwords encrypt KeyStore files; losing them means funds are permanently inaccessible.

Q3: What’s the difference between gasPrice and gasLimit?

• gasPrice: Fee per unit of gas (paid to miners).
• gasLimit: Max gas allocated per transaction.

Q4: Is sharing my public address safe?

Yes. Public addresses are for receiving funds only; private keys control outgoing transactions.

Best Practices

• Backup: Store mnemonics offline (e.g., hardware vaults).
• Encryption: Use AES-256 for local storage.
• Updates: Regularly audit dependencies like ethereumjs-wallet.

For advanced wallet architectures, explore hierarchical deterministic (HD) wallets via BIP44 standards.