You may be wondering where “crypto” comes into play when talking about Web3. Cryptography pervades everything we’ve talked about thus far. It’s the basis for how the average user can self-custody their cryptocurrency, and other digital assets; however, it’s not experienced directly by users. And thank god for that.

We’d be in trouble if users needed an understanding of cryptography in order to use Web3 products. I do think it’s helpful for Web3 product designers to get a base-level understanding of what a Web3 wallet is on a technical-level, and what exactly happens when a Web3 wallet gets created. And, this is just the beginning of Web3 tutorials for product designers. Stay tuned for future Web3 Design Courses where we discuss emerging dApps that will disrupt the internet as we know it today.

Let’s start off slow, with a concept that is highly counter-intuitive, and will take you weeks to wrap your head around. Not bad for cryptography. To create an Ethereum wallet, you essentially choose a number between 1 and 2^256. The number that you choose is the private key, essentially the password for your Web3 wallet. Let’s talk numbers for a second. 2^256 is a very large number. It’s 78-digits and looks like this…

This is counter-intuitive – that we create our wallet password by randomly picking a number within a set range. Couldn’t someone else randomly guess our wallet’s password by guessing passwords all day? Couldn’t an evil developer code a bot that guesses thousands of private keys per second, checks if the private keys control crypto and, if any do, transfer the crypto to the developer’s wallet? The answer is yes, and yes. 

It’s possible for someone to randomly guess your private key and steal your crypto. But the range of private keys is so large (as we just saw above) that it’s practically impossible for anyone guessing in this range to collide with a number that someone else has already guessed. In fact, there are almost as many Ethereum private keys as there are atoms in the Universe (~10^80). The most important thing is that the application creating your wallet randomly selects a number in the range. It’s not advised to choose the number 1, 100, or 1M as a private key.

Now that you understand what a private key is – a random 78-digit number – let’s talk about public keys, and wallet addresses. There is a set process for deriving a public key and address from the private key. Elliptic Curve Cryptography is used to derive the public key from the private key, and the public key is hashed to derive the address from this public key. An explanation of these cryptographic functions is beyond scope, but just understand that the public key, private key, and address are connected to one another. The private-public keys are called “key-pairs”. And this is essentially what an Ethereum wallet is, a private-public key pair. Wallet applications, like MetaMask, manage your key pairs, search the blockchain to see what the balance of your wallet address is, and sign transactions with your private key in order to send crypto, or use dApps.

MetaMask generates a 12-word secret recovery phrase. These 12-words are called mnemonic phrases, and were one of the first major UX improvements in crypto. Rather than making someone write-out a 78-digit number, which could easily be copied incorrectly, users just have to copy a series of 12 everyday words. Wallet apps implement a process for randomly generating this mnemonic phrase, and from the mnemonic phrase, multiple sets of private-public key pairs are derived. This, in itself, is a major UX improvement, because now users can create multiple crypto wallets, each with their own account balances, that can all be recovered using the same secret recovery phrase. You can play around with creating wallets, and seeing how the keys get derived on the backend here.

Okay, so we’ve just learned what happens when you create a Web3 wallet. Wallet apps equip Web3 users with high-grade cryptography that enables them self-custody their digital assets. This is revolutionary, and its importance cannot be understated. Crypto wallets, and blockchain technologies, will fundamentally change how we interact with most software products moving forward.

At this point we understand that the wallet communicates with decentralized applications, and the blockchain, but your understanding of what exactly a blockchain is may still be murky. This is what we’ll tackle in the next section – an explanation of decentralized, peer-to-peer networks.

If you enjoy videos over reading when it comes to online learning then checkout the course on YouTube. This is part 6 of 9 in the Web3 Design Course 2022. Also, make sure to stay tuned for future Web3 Design Courses where we will get into more interesting topics about emerging dApps.


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