Over the last 6 months, we’ve received countless questions about many different aspects of the FINNEY™ phone. Crypto enthusiasts have been eager to hear more about the blockchain functionality we will be integrating into the FINNEY™, the tech community is interested in learning about the security the SIRIN OS™ brings to the mobile environment, and the broader community is enthusiastic to learn how cryptocurrencies and blockchain technology work in a simplified and easy-to-use environment.
Surprisingly, the most common question we receive about the FINNEY™ phone isn’t about any of these areas; it’s about what happens to a FINNEY™ user’s crypto if their phone is lost, stolen, or broken.
It’s a good question, and one that we’ve been addressing on an individual basis as it comes up, but as more crypto novices enter the landscape (as per our vision of mass adoption), we feel that it’s important to discuss it publicly because it deals with a central misunderstanding of how cryptocurrency is stored and how cold storage wallets function.
In order to store cryptocurrencies securely and safely, many crypto users have elected to utilize a cold storage wallet, similar to the one embedded in the FINNEY™, but this comes with a concern — What happens if my FINNEY™ were to crash onto the floor and get damaged, or if I leave my FINNEY™ on a table and forget to take it when I leave? Wouldn’t I lose all of my funds, since I no longer have my cold storage wallet?
This question is based on a misunderstanding of what a wallet is, and how it functions. When people are envisioning their crypto wallet, they’re thinking of it just like a regular wallet: they go to the bank with an empty wallet, take $100 out of their account and put it in their wallet; so now they have $100 less in in bank and $100 more their wallet. But this isn’t how crypto wallets work. Crypto wallets, technically, don’t contain any currency whatsoever.
Cryptocurrency wallets allow users to send and receive cryptocurrencies securely across the blockchain network. Since cryptocurrencies are decentralized, they are stored and maintained in a publicly available ledger (AKA, blockchain), but the wallet itself does not store cryptocurrencies.
A crypto wallet stores the public and private keys which can be used to receive or spend the cryptocurrency that is stored in the blockchain. With the private key, it is possible to write in the public blockchain, effectively spending the associated cryptocurrency stored within that specific wallet.
A hardware wallet, such as a cold storage wallet, is a special type of cryptocurrency wallet which stores the user’s private keys in a secure, offline, physical device. Hardware wallets keep private keys separated from vulnerable, internet-connected devices, so the wallet must be connected to an internet-enabled device, such as a computer, phone, or tablet before the cryptocurrencies can be spent.
In short, crypto wallets are a like a portal that provides the wallet’s owner with access to the wallet’s contents through possession of that wallet’s specific and unique private key. There is no way to remove currency from the blockchain to be put away for safe keeping. The best we can do is to protect the wallet’s private key as securely as possible.
Let’s say a FINNEY™ user is in their kitchen, picking up the newest hot altcoin, and their phone is accidentally dropped into a sink full of water. There’s no need to worry — all of the cryptocurrency will remain safely and securely stored on the blockchain. The only thing that will change is the current portal to the wallet will be disrupted, but it can be easily restored using the recovery phrase on any device that accepts BIP 39 account recovery (for example, another FINNEY™).
A cold storage wallet, like the one included in the FINNEY™ phone, will also reduce the ability of malicious actors (hackers) to gain access to your private key by reducing the amount of time your wallet is connected to the internet. Moreover, the FINNEY™ will provide additional security to other cold storage devices since the FINNEY™ doesn’t rely on potentially compromised third-party devices in order to perform transactions.
Ultimately, SIRIN LABS is doing everything in our power to protect our user’s cryptocurrencies. The SIRIN OS™ will be able to oversee security over the phone, the wallet, and all transactions, which provides an additional layer of security for your private key. And the BIP39 recovery phrase will enable users to retain control and possession of their wallet and all of their cryptocurrencies regardless of what happens to their FINNEY™.