Have you sat there confused about wallets, mnemonic passphrases, seed words, public and private keys – all the jargon around blockchain – and felt your head about to explode?
Well you aren’t the only one! Thankfully after a number of years in the crypto scene, many hours of reading and questioning a few developers, I think I’ve found a way to simplify things with a pretty good analogy!
Hopefully after this read you will have a good understanding of what all these components do, and how they behave together on blockchain.
For the sake of simplicity as well, we will take away the concept of sharing the wallet address publicly so others can anonymously deposit money – I think many people do understand the blockchain concept that a wallet address does not reveal who the owner is, and also won’t reveal the private key or other details.
We are going to call this the Safe Maker Analogy
For this analogy, let’s say this expert Safe Maker’s name is Ian Coleman (the creator of this awesome BIP39 generator that shows how these components interact to create mnemonic codes).
Ian is an expert in making Safes (the kind that have a barrel dial on the front which locks with a combination) with various different qualities.
Customers contact him and ask him to make custom Safes that cannot be replicated, and also are impossible to open without the correct information.
In making these Safes, Ian uses a variety of components and choices to make these unique, and also to ensure that his customer is the only one who can access the safe (even after he makes/gives it to the customer) – BUT most importantly the customer can contact Ian with certain parts of the information about the Safe and it can be unlocked or recreated in some situations.
While making the Safes, Ian also creates them in a variety of shapes (square, rectangle, circular etc) using moulds with different code names, stamps the Safes with a unique serial number and matches that serial number to the Safe unlocking combination using a special calculator.
So here it goes:
Mr Nakamoto wants to get one of these legendary Safes so he can deposit crypto Gold bullion (Also known as Bitcoin) and leave it for his grandchildren to inherit. He calls Ian Coleman the Safe Maker.
Ian tells Mr Nakamoto, that he is happy to do this and explains that Mr Nakamoto needs to take special precautions to ensure that his Safe can be unlocked, if anything should happen to him or his Safe.
Ian organizes Mr Nakamoto to meet at his Workshop and tells him to pick 12 metal ingredients at random from the Periodic Table, and write them down on a piece of paper – this is the Mnemonic Seed Phrase. Ian in this situation cannot lie or cheat, and sadly he also has a rare form of extreme forgetfulness, that erases how he made each Safe once he is finished! So Ian lets Mr Nakamoto know that after he mixes these metals and uses it to make the Safe, he forgets the recipe and destroys any record of how he made it.
Most importantly, Ian also explains that Mr Nakamoto CANNOT lose or forget this recipe of 12 ingredients in exact order, or he will not be able to help Mr Nakamoto if he forgets how to unlock the Safe.
To further make this more secure, Ian gives Mr Nakamoto the option to pick a 13th ingredient without Ian watching, and mix it into the other 12 ingredients – this is the Mnemonic passphrase. Whether or not Mr Nakamoto does this, the recipe for the Safe has now been created.
Before pouring the metal into one of his special Safe moulds, Ian gives Mr Nakamoto a briefcase with a combination lock on it, which he can keep the metal recipe safe (remember, this is the Mnemonic Seed).
This keeps the metal recipe and the 13th ingredient extra secure for Mr Nakamoto, so even if he lost the briefcase containing the recipe copy, it cannot be accessed – this briefcase combination is the Encryption Password.
As Ian pours the metal mixture into a specific mould, he tells Mr Nakamoto that this mould has a unique code to identify it. Other customers may get a Safe made from the same mould, but each Safe is still unique despite being the same shape and dimension – one of these moulds is known as the derivation path.
Once the metal forms and sets, Ian brings out a special calculator he created (see again his Mnemonic code generator) and enters in the 12 metal recipe in exact order. He also asks Mr Nakamoto to enter in his 13th ingredient if he picked one. Lastly, Ian enters the code on the mould he used to form the Safe. The special calculator gives Ian two unique character sequences and a printed receipt:
Note: when we are stating that a sequence is created, keep in mind that in the crypto realm, this is a combination of alpha/numeric characters
- The first number is a serial number that is etched onto the front of the Safe – this is the Wallet Address
- The printed receipt is signed by Mr Nakamoto showing he owns the safe, and it is glued to the bottom of the safe out of view – the is the Public Key
- The second number is the combination to unlock the safe itself – this is the Private Key
(Note this is how the Ian Coleman “Mnemonic Code Converter displays the outputs)
Before the extreme forgetfulness sets in for Ian, he firmly reminds Mr Nakamoto that he should also store the combination to the Safe somewhere where no one can find it, or memorize it himself.
Now you may be asking yourself, why does Ian make Safes this way?
Well, here are a number of dynamics that will help this all fit together:
- Due to his rare Alzheimer’s Ian forgets everything about the creation of the Safe – the only way he can make that exact safe again is if Mr Nakamoto returns with the 12 metal ingredients in exact order, and a 13th ingredient if he picked one, and also points out what mould his Safe was made from! – the mnemonic seed, mnemonic passphrase and derivation path
- Ian will have to use this unique recipe to replicate the Safe, but without it, it can never be remade.
- If Mr Nakamoto forgets the combination to his safe, he can contact Ian and use his special calculator to generate his combination again if he provides the mnemonic seed, passphrase and derivation path – but only Mr Nakamoto knows this information
- As long as Mr Nakamoto doesn’t forget his Safe combination, no one else knows how to unlock it, and no one can make the exact same Safe either
- The serial number (wallet address) on the Safe lets an onlooker know it’s uniqueness, but not how to unlock it
- The signed receipt (Public Key) on the bottom is not normally seen by any onlookers, and proves that Mr Nakamoto owns the unique Safe and the serial number, but cannot be used to unlock the Safe.
- If someone steals the Safe, none of the visible information helps them unlock it. Even if they stole the briefcase Mr Nakamoto has with the recipe of how its made – remember the briefcase is locked with a combination (Encryption Password)
Hopefully this sheds some light on how the different parts of cryptography tie together with Mnemonic code and key pairs in the blockchain space!
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Summary of Terms Used for the Safe-Maker
- Mnemonic seed phrase = Safe metal recipe – 12 random metal ingredients
- Mnemonic passphrase = extra 13th ingredient
- Encryption Password = briefcase combination lock code for the metal recipe
- Derivation Path = Mould of Safe
- Wallet Address = serial number on safe
- Public key = signed receipt on bottom of safe
- Private key = combination to unlock safe
Here is another resource which helps distinguish between the differences between Public Key and Wallet address, that helped me:
What is the difference between the Public Key and Wallet Address?https://www.reddit.com/r/OntologyNetwork/comments/9ltttq/what_is_the_difference_between_the_public_key_and/
TLDR; Private Keys produce Public Keys. Public Keys produce Wallet Addresses… However, Wallet Addresses cannot be used to produce/reveal Public Keys. Public Keyscannot be used to produce/reveal Private Keys.