Next Bitcoin Core Release To Finally Connect Hardware Wallets To Full Nodes (#GotBitcoin)

In the coming release of Bitcoin Core, the 18th major version of the cryptocurrency’s most widely used software, the code will finally, natively allow users to connect bitcoin full nodes to hardware wallets. Next Bitcoin Core Release To Finally Connect Hardware Wallets To Full Nodes (#GotBitcoin)

It’s a moment true bitcoin nerds have been waiting for.

It sounds technical, but it’s a big step for the security for users. Bitcoin full nodes allow users to verify that transactions actually took place, meanwhile, hardware wallets are considered one of the most secure ways to store bitcoin. Thus, making it easier to join the two together is a big win for users who want full control of their bitcoin – and don’t want to lose it.

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Bitcoin Core lead maintainer Wladimir van der Laan, who is in charge of coordinating the coming upgrade, told CoinDesk it’s one of the features he’s been most excited about for quite some time.

Still, the change is part of a much broader effort to make bitcoin full nodes easier to use for people other than just tech geeks. Casa, for example, has launched a node that works without much setup necessary, while developers of the bitcoin protocol are constantly trying to reduce how much data users need to store to run one (as users need to store every transaction ever sent on the blockchain, it’s pretty weighty).

As Bitcoin Core contributor Andrew Chow, one of the lead developers on the project, put it on Twitter:

He admits it’s “still command line only and manual,” but argued “it’s a big step forward” because the functionality is finally there, even if in a somewhat clunky form. Developers will continue to make it easier to use down the line.

Eating Your Cake

So first off, why use a bitcoin full node in the first place?

In order to send a transaction on the bitcoin network, users need to connect to a bitcoin node. Full nodes now require a couple of hundred gigabytes of data, which is a lot, enough to fill a small laptop.

But it does serve a purpose, as rather than trust that someone else is feeding you the correct financial information, such as whether you really received a transaction or not, you’re able to validate this information yourself.

As the value proposition of bitcoin is to not trust others, some developers go as far as to argue that using bitcoin in a way that removes the full node defeats the purpose of bitcoin.

Bitcoin Core contributor Sjors Provoost, for example, has argued that running a full node is helpful for “knowing your bitcoin is real,” offering the example of Segwit2x, a proposed bitcoin fork from 2017 in which some companies, miners, and users proposed upgrading bitcoin to a larger block size.

There was concern that in the case Segwit2x broke bitcoin into two, mobile wallets relying on Simplified Payment Verification (SPV) technology would be susceptible to trickery from miners.

“That server can in theory also lie about your balance. In a scenario like SegWit2x, it could decide which side of the fork it wants to show you. With a full node you don’t have to worry about that,” Provoost told CoinDesk.

Then there’s the issue of privacy.

“The wallet software that normally comes with hardware wallets reveals your addresses to a third-party server,” Provoost continued. The full node would replace this wallet software, giving users privacy again.

“At the end of the day, it comes down to the trade-off between convenience and trust,” Bitcoin Core wallet maintainer Samuel Dobson told CoinDesk.

These problems are what’s fueling the idea that maybe one day “everyone” should run this full node software, so they don’t have to trust anyone else to send them accurate financial information.

“Yes, I believe that everybody will eventually run a full node. I wish a future where not having a full node will severely limit your user experience and the realm of things you can do with bitcoin,” as BTCPay creator Nicolas Dorier wrote in a recent blog post.

Secure, Offline Bitcoin

The other piece is hardware wallets are considered the most secure way to store bitcoin. That’s especially true when compared to storing them on internet-connected computers, which are often totally exposed to hackers.

“PCs are a much larger attack surface than a small dedicated device to store your keys, designed specifically with security in mind. They’re also less prone to random crashes or corruption which could cause you to lose un-backed-up keys on your computer,” Dobson told CoinDesk.

With this new tech in place in the Bitcoin Core software, users can store their bitcoin on an offline hardware wallet, then use their full node to verify the data they’re getting fed, such as transaction data, is correct.

The technology has been a long-time coming. Connecting hardware to a full node is also one of the key goals of Electrum Personal Server, pioneered by developer Chris Belcher. “Hopefully this software can be part of the plan to get full node wallets into the hands of as many people as possible,” he said in the project announcement post last year.

There are pros and cons to each project, though, Provoost admitted.

“The HWI project should reduce the number of separate software components needed, though at the moment I think it’s still less user-friendly [than Electrum Personal Server],” he said.

And there’s still a ways to go to get the graphical interface totally working. “Maybe one day in the future we’ll have this graphical picture that I showed you – and after that we’ll have unicorns,” Provoost said in his presentation on the topic.

Further Features

While hardware wallet support in 0.18 has generated much excitement, As usual, the release is filled with other contributions from the pool of global Bitcoin Core contributors.

Dobson told CoinDesk about a few features he finds “exciting,” including refinements to a new “language” that the groundwork was laid for in an earlier version of Bitcoin Core. New commands will allow developers to use this language to “import descriptors.”

“You can provide such a descriptor to Core […] and it will parse it and import the keys, scripts, etc. into your wallet for you,” Dobson said, explaining further:

Dobson also pointed to a new “multiwallet” command, which will allow users to pair with multiple wallets within their bitcoin core full node. While the ability to use multiple wallets at once has existed in the code previously, 0.18.0 plugs the feature in the graphical user interface for the first time, so people no longer have to be full-blown developers using the command line to take advantage of the feature.

“Version 0.18 adds support to the GUI to do that, as well as a few improvements in how it works too,” Dobson said.

As of now, version 0.18 is in the “release candidate” stage of the software development cycle, meaning passionate bitcoin developers and companies are still testing it, picking away at the code in an effort to eradicate any bugs, before it’s released to the larger public to download.

According to project developers, it will be available for users to download in the coming weeks.

Updated: 11-25-2019

New Bitcoin Core Software Update Uses Bech32 Addresses By Default

The Bitcoin Core development team released the latest update on Nov. 24 to Bitcoin (BTC)’s original software client — the nineteenth in the coin’s eleven-year history.

Releasing Bitcoin Core 0.19.0 (eventually 0.19.0.1 in the available download version, following the discovery of a last-minute issue) was overseen by lead maintainer Wladimir J. van der Laan and was reportedly developed by over a hundred contributors over a roughly six month period.

New Wallet Format, Better SegWit Interoperability

As Aaron van Wirdum has revealed, 0.19.0.1 includes a range of performance improvements, updates and bug fixes, resulting from 550 merged pull requests.

The “bech32” address format (BIP 173) is now set for the first time as the default option in the Bitcoin Core wallet Graphical User Interface (GUI), having first been introduced in early 2018 with version 0.16.0.

Bech32 contains a number of amendments, such as no longer making a distinction between lowercase and capital letters and formatting addresses to begin with “bc1” as opposed to 1 or 3. The addresses are thus a bit longer than existing format, but use fewer different characters. The changes are broadly intended to reduce the margin for human error in typos or reading aloud.

Bech32 also reportedly improves interoperability with SegWit wallets, with transactions now requiring less data to be transmitted over the Bitcoin network — and thus included in the blockchain — thereby reducing costs.

Van Wirdum indicates that the updated software client also now makes it possible for users to start a pruned node immediately from setup, even those with low disk space.

Privacy And Security Improvements

Nodes are now required to establish more connections to one another in a bid to better thwart partitioning attacks. Bloom Filters — a way for light clients, such as those running from mobile phones, to request relevant data from full nodes on the network — have now been deprecated, as they are deemed to be weak on privacy.

Instead of Bloom Filters, 0.19.0.1 is evolving toward supporting a newer solution called “compact client-side block filtering” (BIP 158), which essentially reverses the operation of Bloom Filters by having full nodes create filters for each block and enabling light clients to use these filters to determine whether transactions relevant to them may have happened in a block.

Bitcoin Core 0.19.0 has removed payment protocol (BIP 70) from its GUI, noting that it was never widely adopted and that most wallets still use the more basic URI scheme (BIP 21) to receive payments.

The minor features outlined include support for the Partially Signed Bitcoin Transactions (PSBT) protocol, which is useful for multi-signature and CoinJoin transactions.

This October, Bitcoin Core developer Greg Maxwell had criticized the “attractive mystery” that fear of a 51% attack on Bitcoin entails, arguing that any mechanism cooked up to mitigate it always implies centralization and represents a far greater threat to the network’s integrity. Next Bitcoin Core Release,Next Bitcoin Core Release,Next Bitcoin Core Release

Updated: 6-1-2022

7 Reasons To Run Your Own Bitcoin Node

To function reliably and securely, bitcoin depends on the voluntary cooperation of thousands of individuals around the globe. Nodes, which make up the bitcoin network and verify transactions and blocks, play a key role in this effort. If you’re wondering why you should run a bitcoin node yourself, there are many benefits to consider—both personally and for the security and resiliency of the bitcoin ecosystem.

1. Enforce The Bitcoin Ruleset

By running your own node, you contribute to enforcing bitcoin’s ruleset, which is good for both you and the bitcoin network. The ruleset is a collection of parameters that define bitcoin’s specific properties and processes. Bitcoin’s rules are established by the consensus of bitcoin users and are programmed into its code. Each node coordinates with other nodes to ensure the rules are followed.

Enforcing the ruleset helps uphold the integrity of bitcoin. If there is ever a proposed fork—a change in the rules—with which you disagree, running a node enables you to resist the change and continue to support the existing rules. Conversely, it empowers you as a user to help support protocol forks with which you agree. Taproot is a recent example of a fork activated after broad miner and node consensus.

Enforcing the ruleset also helps protect your investment in bitcoin. Arguably, the most important rule impacting bitcoin’s value is the limit on its total supply. Expressed as an equation and embedded in the bitcoin code, it caps the maximum number of bitcoin at 21 million. By running a node, you contribute to preserving this vital rule which helps protect bitcoin’s fixed supply.

2. Verify Received Transactions Without Third Parties

By running your own node and connecting a bitcoin wallet to it, you can verify transactions you receive. Running your own node enables this by storing a local copy of the bitcoin ruleset and blockchain which you know to be valid. This lets you independently ensure that the bitcoin you receive are legitimate.

One of the principles of bitcoin, which goes back to before bitcoin existed, is reducing trust in third parties. Though the risk is small, when you use a light wallet, your ability to perform verification is limited and you’re trusting the node(s) it’s connected to. If the light wallet node operator and the sender conspire, they can fool your wallet into believing that it has received bitcoin that it hasn’t.

Additionally, if there’s a chain split caused by a protocol fork and someone sends you bitcoin, you are in your light wallet node operator’s hands when it comes to confirming you’ve received bitcoin from the “right” chain and not tokens from a chain you don’t consider to be bitcoin.

Verifying received transactions with your own node offers you proof that nothing has been manipulated and no transaction you’ve received violates the ruleset. This gives you more control over your bitcoin wealth—removing worry about the integrity or accuracy of verifications provided by others. Verifying your own transactions also helps bitcoin in general because it lessens network dependence on centralized institutions.

3. Improve Your Privacy

As discussed above, running your own node helps reduce your reliance on third parties, protecting your privacy. Using your own node prevents exposing identifying information about yourself unnecessarily, and your broadcasted transactions are relayed in the same way as any transaction, which helps protect the node’s identity.

Conversely, when you rely on a light wallet, the servers and nodes you’re connected to can see your IP address, all your queries, and therefore, your balances and spending activity. This is in addition to any other information you provided to establish your service (such as email address, phone number, or physical address), all of which can connect you to your transactions and balances.

Whether to rely on a third party represents a trade-off that depends on your use case. In some instances, a trusted third party can offer you significant advantages in convenience and security, such as with collaborative custody, or when engaging in smaller transactions via a mobile phone wallet.

In other scenarios, when privacy takes more precedence, running your own node and connecting a wallet to it helps optimize your privacy because it enables you to query, transmit, and verify your transactions directly and without the need of a third party. As with some light wallets, you can also configure your node to run on the Tor protocol, which further contributes to protecting your privacy by hiding your IP address.

Combining These Elements Enhances Other Best Practices For Privacy, Such As:

Using a new address to receive each payment
Using separate accounts for different purposes (e.g., daily spending, receiving a salary, savings)
Being selective with which addresses you make each spend from (known as coin control).

Lastly, if you use block explorers to monitor transactions, you can further enhance your privacy by hosting blockchain data locally, which we’ll cover next.

4. Get Local Access To Blockchain Data

Running your own node gives you better access to information about bitcoin and the bitcoin blockchain. There are a couple of powerful tools that help in this regard, the most notable being a locally-hosted block explorer.

Locally-Hosted block Explorer

A Block Explorer Is Like A Search Engine For The Blockchain. Block Explorers Give You The Ability To Investigate Helpful Information Such As:

The status of pending transactions
Individual wallet address activity
Daily transaction volumes
Hashrates and difficulty levels for mining
Congestion levels on the blockchain

A Locally-Hosted Block Explorer Is A Block Explorer That Runs On Your Local Copy Of The Bitcoin Blockchain. A Locally-Hosted Block Explorer Offers You The Advantages Of Speed, Verification, And Privacy:

Speed: Local block explorers are faster because they are not limited by bandwidth and run searches directly on your device.
Verification: They are verifiable because they reference a copy of the bitcoin blockchain that is stored on your local machine, which you know to be updated, accurate, and following the right ruleset.
Privacy: They are private because, similar to gaining the ability to transmit and verify your own transactions, they remove reliance on third parties who may log your IP address in relation to searches for specific wallet addresses or transaction IDs.

RPC Console

The bitcoin node software includes something called the remote procedure call (RPC) console, which lets you retrieve blockchain data from your own node. This is the same tool that locally-hosted block explorers use as well.

The RPC can process a wide array of commands for retrieving information from your node, one of the most noteworthy being “gettxoutsetinfo”, which allows you to independently verify the total current supply of bitcoin.

5. Help Bolster The Decentralization of Bitcoin

When you run your own node at home, you take possession of a copy of the bitcoin blockchain and ruleset and maintain it at your unique physical location. No one can prevent you from accessing your node or limit your ability to use it. This prevents censorship and contributes to the redundancy of the blockchain while helping improve its geographic distribution. As a result, by running a node, you help decentralize and secure bitcoin.

During its short history, bitcoin has faced several challenges from governments seeking to limit its use and legality. One reason bitcoin survives such restrictions is that the network is distributed across thousands of nodes in every country globally. The geographical breadth of the bitcoin network also protects it from localized hazards such as power outages, storms, earthquakes, war, Carrington events, and other black-swan risks.

Archival Nodes vs. Pruned Nodes

Another important factor impacting the decentralization of bitcoin relates to the different types of nodes. Full nodes can run with either a complete copy of the bitcoin blockchain (i.e., an archival node) or a partial copy of the blockchain (i.e., a pruned node). Pruned nodes take up less file space because they use summary blocks to replicate the complete bitcoin transaction history.

Both Types Of Nodes Add Value To Bitcoin, But Archival Nodes Play A Special Role Because They Retain A Complete Copy Of The Bitcoin Blockchain. They Help:

Increase redundancy of copies of the full blockchain history
Provide resources for light wallets to connect to
Bootstrap brand new full nodes on their first sync
Provide the missing data to pruned nodes when they need it

By choosing to run an archival node, you help reduce reliance on centralized services for such activities, which further contributes to the decentralization and stability of the bitcoin network.

6. Run A Lightning Node And Open Payment Channels

The Lightning Network (LN) adds a second layer to bitcoin that adds more functionality to the network—it moves transactions off of the main bitcoin blockchain, enabling faster processing time and lower costs per transaction via peer-to-peer payment channels.

If you want to set up a Lightning channel with someone to start transacting without involving third parties, you’ll need a Lightning node. A Lightning node is best run in tandem with a bitcoin archival full node (although it is possible to set one up without a bitcoin node, there are privacy and security trade-offs).

Running a Lightning node gives you the ability to make fast payments to various retail stores, pay for content online, and receive payments yourself. And if you’re willing to put the time, effort, and capital into establishing your Lightning node as a payment channel hub, you can also support the Lightning Network with liquidity and earn payment routing fees.

7. Increase Your Bitcoin Knowledge

Even if you don’t think you have any immediate need for running a node, it’s good to know the essential role nodes play and how to set one up just in case you need to in the future (e.g., during a controversial fork).

Running your own bitcoin node offers all the advantages outlined above while increasing your knowledge of bitcoin and the key components that make it work. With the knowledge and experience you gain from running a node, bitcoin becomes more useful to you, and you’re able to help others use it as well.

Becoming more knowledgeable about bitcoin also enables you to add value to the bitcoin community. The knowledge you gain from running a node can help you participate in the debate over upgrades—such as Taproot or covenants. As new considerations arise, the knowledge you gain from running a node and understanding its benefits can empower you to make a more meaningful contribution to the conversation.

More Helpful Resources From Unchained Capital

Discover more about the importance of bitcoin nodes or register to attend one of our live webinars to learn more. In addition to more on the bitcoin basics, you’ll have the opportunity to learn how to save tax-advantaged bitcoin while keeping control of your private keys with an Unchained IRA, or how to take self-custody of your bitcoin while eliminating single points of failure with an Unchained multisig vault.

Don’t have time for a webinar? Join our email list below for updates on other educational opportunities from Unchained Capital. You can also visit our YouTube channel to view our extensive archive of helpful webinars, interviews, and more.

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