Understanding Electrum

[margotcoins]

Hi,

I downloaded Electrum, but somehow I still fail to understand how it works.

This is just a scenario for me to better understand, I am probably compromising security by doing some/all of these (I guess):

I see the wallet file default_wallet in the folder on my computer;

If my ssd fails/lose pc/whatever my wallet is gone; right?

But if before I lose pc I make a copy of said file (default_wallet) do I still have my wallet?

What if my friend send me some coins AFTER my ssd failed and I only have the copied file, where do those money go? Into wallet? Into a lost never to be accessible again wallet? into nothing???

Many thanks!

[Lucius]

In the installation process of Electrum you will get 12 words (seed), this is most important thing for you, this is your backup and a way to recovery of your wallet. You need to write down those 12 words, very carefully checking each word. It is also important to not save seed on your PC as text, or to send it to e-mail. In case your hard disk is corrupted / broken, someone steals your computer or in any other unfortunate case, all you need is to download Electrum wallet again (only from https://electrum.org) and use those 12 words to recover your coins.

Your money (bitcoin) will always go to your address, even if you delete your wallet. You do not really own bitcoins, just private keys for generated addresses in your wallet. Bitcoins are stored on blockchain, and your wallet is just user interface which allow you to send / receive coins.

Regarding wallet files, you can also make copy of them for extra security. Just be sure to also save password which you can set in process of installation, it serves for additional protection of your wallet.

[bob123]

Electrum is a hierarchical deterministic (HD) wallet.

This means that all private keys (and therefore also public keys and addresses) are derived by 1 long random number (seed).
This big random number (seed) is being encoded into a 12 word mnemonic code upon creating the wallet.

The wallet file basically holds your master private key (this key can be used to derive all private keys - it is derived from your seed).


Now, if your hard drive crashes, you can always just import your backed up wallet file to restore the whole history and gain access to all of your private keys (this also includes access to any coins sent to you after you have lost access to your initial wallet file).
Another option is to create a new wallet file using the seed (12 word mnemonic code; which you hopefully have a backup of; if not -> create one).


It doesn't matter when someone sends you coins. As long as you have the wallet file / mnemonic code, you will be able to access your coins.

[NeuroticFish]

The coins are never in the wallet. The coins are always on the blockchain.
If you created the wallet in the default way, the wallet contains the seed and information about a number of "last used addresses". (In other cases may contain directly some private keys or simply view-only addresses, but I guess it's not the case).
The wallet will generate as it needs new addresses (private keys) based on the seed whenever it needs so, based on the privacy/security settings you have.

So, if you want to clearly always have access to your coins no matter what happens, keep that seed safely, maybe in multiple places, offline.
You can, for convenience, also backup your wallet file (default_wallet) and it will be OK for the cases of hardware failures and it will have also the "new coins". In some cases you may not see the new coins by default, but it's only a setting to be changed if that happens (force electrum "see"/"generate" more internal addresses).

Please don't backup your wallet without a minimal password protection, please don't back it up onto e-mail or cloud storage.

[margotcoins]

thank you, thank you, thank you!!!

Now I have a better understanding how it works.

I did have my 12 words stored on a cloud so I moved it offline right away.

My next dilemma would be about those mnemonic codes. I have three of them I am not sure what they belong to. One of them is for sure my Electrum wallet, the other two I have no idea, probably just from online wallets/exchanges I created in the last few days. They are empty for sure but they must belong to some websites.

What would you advise I do? Create a new wallet and start over? Is there perhaps a way to tell my electrum wallet to regenerate those 12 words so I can match them to my list and see which one is which?

I do have a password for accessing my wallet so making a copy of the wallet file and hide it somewhere safe it is sounding more and more alluring, maybe on a usb I am thinking.

Dumb question: what is going to stop scammers to generate random mnemonic words and accessing random wallets around the world? I mean are there really so few wallets? I don't think so ..  I am thinking down the line guessing or generating 12 words in row and accessing some other people coins must not really be that against the odds of probability, also statistic is not really in our favor since all the words have full meaning and there must be a lot of wallets out there! What am I missing?

Many thanks!

[moha sasa]

Hi,
I downloaded Electrum, but somehow I still fail to understand how it works.

- You should do yourself a favor and read how it works:-

https://buildmedia.readthedocs.org/media/pdf/electrum/latest/electrum.pdf

[pooya87]

I did have my 12 words stored on a cloud so I moved it offline right away.

technically anything that has been online is considered compromised. transferring it offline doesn't change anything. if you want true cold storage security then you have to start a new set up in a clean and offline computer (that has never been and never will be connected to the internet) and create a new wallet (with new seed) and then send your coins there by making a transaction.

Dumb question: what is going to stop scammers to generate random mnemonic words and accessing random wallets around the world? I mean are there really so few wallets? I don't think so ..  I am thinking down the line guessing or generating 12 words in row and accessing some other people coins must not really be that against the odds of probability, also statistic is not really in our favor since all the words have full meaning and there must be a lot of wallets out there! What am I missing?

it is the same dilemma as private keys! there is nothing stopping anybody from creating random keys/seeds but what protects your seed/private key is that the possible range of numbers to choose from is so huge that even if you continue guessing millions of them per second you still wouldn't be able to finish in a million years.

[nc50lc]

Is there perhaps a way to tell my electrum wallet to regenerate those 12 words so I can match them to my list and see which one is which?

Electrum will reject the mnemonic SEED by default if it wasn't generated by it, the "next" button will be grayed out.
So to find out which is the correct one, simply restore via SEED (Create wallet->I already have a SEED).

By all means, make sure that you have a physical written copy other than offline backup to make sure that it's safe from data loss.

[Lucius]

Dumb question: what is going to stop scammers to generate random mnemonic words and accessing random wallets around the world? I mean are there really so few wallets? I don't think so ..  I am thinking down the line guessing or generating 12 words in row and accessing some other people coins must not really be that against the odds of probability, also statistic is not really in our favor since all the words have full meaning and there must be a lot of wallets out there! What am I missing?

When someone thinks in the way you think then it is quite logical to presume that 12 words are not enough to protect your wallet, just because anyone can use Electrum seed list and try somehow to guess your seed. But the thing is a lot more complicated than that, it is not only about 12 words seed from 2048 word list, it is also about 5 different languages. If you look at the next post some things will be much clearer.

As some in this thread have been trying to explain to you, most alphabets have a LOT less than 2048 letters.

Humans seem to have a very difficult time wrapping their minds around big numbers.  I'll try to put it in perspective for you as best I can.

Lets try some simple math:

The english alphabet has 26 letters.  That means that you have 26 possibilities for the first character. Each of those 26 possible first characters can match up with another 26 possibilities for the second character, so that's 26 X 26 possibilities for 2 characters.  We can keep doing this for however many characters there are in the "seed":

26 X 26 X 26 X 26 X 26 X 26 X 26 X 26 X 26 X 26 X 26 X 26 = 26¹² = 9.54 X 10¹⁶

That's just a little bit less than 10,000,000,000,000,000 total possibilities for a 12 character seed from a 26 character alphabet.  If you could try 10 billion passwords per second, it would take you about 11.5 DAYS to try all possibilities.  This is why a 12 character seed doesn't "feel" very secure to you.


Now lets try the same with a 2048 character alphabet...

2048 X 2048 X 2048 X 2048 X 2048 X 2048 X 2048 X 2048 X 2048 X 2048 X 2048 X 2048 = 5.44 X 10³⁹
That's a bit more than 5,000,000,000,000,000,000,000,000,000,000,000,000,000 total possibilities for a 12 character seed from a 2048 character alphabet.  If you could try 10 billion passwords per second, it would take you more than 1.7 X 10²² YEARS to try all possibilities.

That's significantly longer than the earth has existed. If you worked for the entire time that the earth has existed so far, and then again, and then again, and so on... You'd have to repeat that entire time more than 3.7 X 10¹² times.

1.7 X 10²² YEARS is significantly longer than the universe has existed.  If you worked for the entire time that the universe has existed, and then again, and then again, and so on...  You'd have to repeat that entire time more than 1,000,000,000,000 times!

https://bitcointalk.org/index.php?topic=1623339.0

[margotcoins]

a lot of great information to process thank you!!! I have a lot to digest ...

I am still confused about cold wallets though, how can you operate a wallet if always offline, I mean you can receive funds (also not sure how you can check for balance) but how is it possible to send coins if the machine will never be connected to the internet?

Thanks!

if you want true cold storage security then you have to start a new set up in a clean and offline computer (that has never been and never will be connected to the internet)

[TryNinja]

a lot of great information to process thank you!!! I have a lot to digest ...

I am still confused about cold wallets though, how can you operate a wallet if always offline, I mean you can receive funds (also not sure how you can check for balance)

By checking the balance on a connected device (either with a view-only copy of the wallet or by checking the address in a block explorer).

but how is it possible to send coins if the machine will never be connected to the internet?

Craft the raw tx in a connected device (where you can see the inputs), send them to the offline cold-device through a flash drive, sign it with the private-keys, send it back to the online device and broadcast it.

This video shows it well: https://youtu.be/DQumISxkJsQ

[margotcoins]

thank you so much that's a great video that tells it all!

I guess I'll have to watch it more than a couple of times to learn the practice to the letter and put it in place, thanks again for all the support, you guys are awesome!

[pooya87]

~
I am still confused about cold wallets though, how can you operate a wallet if always offline, I mean you can receive funds (also not sure how you can check for balance) but how is it possible to send coins if the machine will never be connected to the internet?
~

maybe a quick summary of how bitcoin works can help you understand it better.
in bitcoin, you don't "store" bitcoin! instead you store the "keys", and your "coins" are the transactions that are stored on the blockchain and all the full nodes have a copy of it. to spend, you only "prove ownership" by creating a signature with some complicated cryptographic method.
that is why cold storage works, because it simply is a storage of keys.

as for spending you just have to be online (one a different device) to be able to look at the blockchain (since it contains your "coins") and get the transaction IDs and create a transaction. then transfer this to your cold storage where your keys were and sign it. then go back online and send it to the network so that the nodes know about it.

[margotcoins]

I am starting to see the whole picture now, it's as beautiful as fascinating design, I guess I have been bitten by the coin bug now!

[HCP]

My next dilemma would be about those mnemonic codes. I have three of them I am not sure what they belong to. One of them is for sure my Electrum wallet, the other two I have no idea, probably just from online wallets/exchanges I created in the last few days. They are empty for sure but they must belong to some websites.

Is there perhaps a way to tell my electrum wallet to regenerate those 12 words so I can match them to my list and see which one is which?

To answer this specific question... Yes, you can tell which one is the Electrum one.

Open Electrum and use the "Wallet -> Seed" menu option. If you have a password set, you'll be prompted to enter it... Then your 12 word seed mnemonic will be shown to you.

That way you can be confident that you have the correct 12 words safely written down!

[margotcoins]

my "seed" option is greyed out for some reason .. I have the wallet open after the password, and that's the only option that's not available. Anyway don't worry about it too much, I made so many mistakes in creating this wallet that I'll have to start over as soon as I need a secure one. Thanks again!

[Lucius]

my "seed" option is greyed out for some reason...

The reason is that you've probably made 2FA wallet, and in this case you can not see your seed (check the accuracy of words). 2FA wallet is for extra security, but in case of Electrum is not free, and it can be very problematic to restore wallet if you lost your phone and seed.

In process of wallet creation pay pay attention to all steps, and the simplest option is to select Standard wallet.

[HCP]

my "seed" option is greyed out for some reason ..

It's either a 2FA wallet (and will say [2fa] in the title bar next to the wallet name), or you have used an imported BIP39 seed that was generated by a wallet other than Electrum when you first created the wallet.

Either of these scenarios results in Electrum generating a wallet file that does not store the 12 word seed (so the option is greyed out in the menu).

[margotcoins]

it does say 2fa up on top but I also seem to remember that I selected standard wallet in the process creation, is this even possible?

[HCP]

it does say 2fa up on top but I also seem to remember that I selected standard wallet in the process creation, is this even possible?

No, it isn't... The options are:
- standard wallet
- wallet with 2FA
- multi Sig
- import private keys/addresses


Refer:



You will need to make sure that you have the seed safely backed up in case of 2FA device loss... It's the only way you'll be able to recover if your 2FA app does not support backups.

As Lucius mentioned, there are costs involved with sending from a 2fa wallet... Read here: https://api.trustedcoin.com/#/electrum-help