Getting Started with the Ledger Nano S

The Ledger Nano S Cryptocurrency Hardware Wallet

Current price: $99.00

The Ledger Nano S can be ordered here (affiliate link).

Go to start.ledgerwallet.com and follow the instructions there to prepare the hardware wallet.

Initializing the Ledger Nano S:

I am not going to give detailed instructions on how to get the device up and running as they are available at start.ledgerwallet.com and may change with future updates. The current instructions are easy to follow and included installing the Ledger Live app, initializing your Ledger Nano S by creating a pin and saving your recovery seed (very important!). After that, you need to install apps to the Ledger Nano S and then add accounts to your device before adding your crypto accounts.

Operating the Ledger Nano S:

The Ledger Nano S has only two buttons, and it has menus to navigate. This is accomplished by using the left button as a ‘up’ or ‘left’ button, the right button as an ‘down’ or ‘right’ button and both buttons simultaneously as an ‘enter’ or ‘continue’ command. 

Sending crypto to your Ledger Nano S:

Using the Ledger Live app that you have installed to your computer, you can select one of your accounts on the lower left corner of the app. Once the account is selected, ‘Send’ and ‘Receive’ buttons are visible. Selecting the ‘Receive’ button will give you the address at which the Ledger Nano S can receive funds for that account. The address shown can be copied and pasted into the app you are sending crypto from (or given to a friend so that they can send crypto to you). 

Of course, one of the cool things that blockchain allows you to do is to view the immutable ledger that records all transactions. Here is my first transaction on the Ledger Nano S:

https://etherscan.io/tx/0x8e820f84780ef55ea27c438bc51d87b7761e8654d5cc7a623661d29865518297

Why use a hardware wallet?

“Don’t store your coins on an exchange!”

Like many cryptocurrency enthusiasts, I have seen this posted on Reddit and other internet hangouts many times.  There are a few reasons to have your coins on an exchange:

  • Ease of acquiring
  • Ease of trading
  • Less effort to setup and maintain a wallet

However, storing coins on an exchange is in conflict with one of the great advantages of cryptocurrencies:

  • Counter party risk
    • Bitcoin has not been hacked, but exchanges seem to be routinely hacked. Storing coins on an exchange exposes the owner of the coins to the same risks of the traditional banking system (i.e. getting locked out of your account, having your funds frozen ,etc.).  Where as properly protected coins can be protected from these things.Bad players – storing coins on an exchange equals trusting that the exchanges owners and employees will not steal your coins.

After considering this, as a newbie to crypto, I downloaded the Jaxx wallet and the Bread (now BRD) wallet and stored my crypto on my phone.  Maybe many people do this, it certainly is convenient. 

Storing crypto on a phone has some advantages:

  • Purchasing goods and services at local vendors is convenient with a phone wallet, it is always with you.
  • The phone wallets are very easy to use and all the ones that I have used are available free of charge.

BUT….phones are connected to the internet nearly 24/7 and are therefore able to be attacked 24/7. This is a significant disadvantage and risk as you start to acquire more crypto.

This risk associated with phone wallets creates an opportunity for manufacturers of secure hardware devices that are not connected to the internet. This is why I checked out the Ledger Nano S.

Additional information of interest:
Ledger Nano S Github

The Ledger Nano S can be ordered here (affiliate link).

As a philosophical technologist, Hari is concerned with emerging innovations and how they impact our life. Mr. Seldon spends much time separating the outstanding from the paltry and incorporating only holistic beneficial technologies into his life.

Coinbase and the ‘John Doe’ Summons

Coinbase is a large cryptocurrency service and exchange in the US that has more than 13 million users as of 11/17. It was founded in 2011 and is very popular and easy to use.

Coinbase practices full anti-money laundering and know your customer compliance. This results in some rather intrusive information being requested from the would be cryptocurrency buyer. If you become a Coinbase customer, be prepared to to submit to your computer’s camera taking a photo/video of you and your legal identification document. It is even more intrusive than opening a bank account in the US.

Despite following all these regulations and precautions that put all customer’s private information in a centralized database that increases risk to all customers from bad actors, Coinbase found itself in a battle with the Internal Revenue Service. The IRS, despite not having clear rules on how to handle cryptocurrencies, was , nevertheless, concerned that some of Coinbase’s customers may not be paying enough taxes.

Therefore, the IRS, acting in rogue fashion issued a ‘John Doe’ summons. That is, a summons in which the IRS named no particular suspect and no particular crime – just a suspicion that someone, somewhere has interacted with Coinbase’ services in an illegal way. Now, I am no lawyer, but this seems to be a clear violation of the 4th amendment to the United States constitution:

Amendment IV
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

This is appears to be just another instance that proves to me that the US Constitution is no longer the supreme law of the land.

Coinbase did put up a fight, and I believe did the best they could to protect their customers.

Just be aware that the IRS, although not clear about how people should file earnings on cryptocurrencies does expect these earnings to be filed.

 

To become a Coinbase customer, sign up with the link below (this is an affiliate link).

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5 Simple Reasons Bitcoin Exists

Bitcoin

Why is Bitcoin Needed?

Issues with current financial system:

  • Security of Your Information
    • Equifax hack
    • DNC hack?
    • Target hack
  • Currency Risk
    • Sovereign Debt Drives Currency Inflation
    • Quantitative Easing Drives Currency Inflation
  • Your Fiat Currency Assets May Be Seized by Financial Institutions or Government
  • Settlement Across National Borders is not Easy
  • Billions of Unbanked have no Access to the Current Financial System

 

Security of your information

Equifax hack:

“Last week, the credit-rating company disclosed that it was hacked earlier this year, leaving 143 million U.S. consumers’ personal information exposed. “ ~ http://www.npr.org/2017/09/14/550949718/after-equifax-data-breach-consumers-are-largely-on-their-own

143 million U.S. customers are vulnerable to having their identity and money stolen and credit rating ruined because they have given this information and these funds to a trusted third party. Equifax surley tried to protect this data, but it is just a very large honeypot that is tempting to cyber criminals.

If each customer was responsible for their own funds, the hacker would not receive nearly as large of a reward for each hack. Alternatively, it would require much more work to hack all 143 million people individually. This is the safety in the decentralization that Bitcoin provides.

The DNC hack shows that even some of the most powerful organizations in the world are vulnerable to being breached.

The 2013 Target hack exposed up to 40 million credit and debit cards and personal data for up to 70 million customers, is similar to the Equifax hack. The ability and need for Target to store its customers payment data resulted in a massive attraction for cyber criminals.

Solution:

Bitcoin works differently than the digital dollars we mostly use now. With Bitcoin, each individual holds onto their own money – similar to cash. Also, the coins are cryptographically secured and cannot be tampered with. Bitcoin can be transferred person to person without the need for a bank or credit card company.

One thing to note about this is that storing bitcoin on an exchange removes these advantages and makes the bitcoin just as vulnerable as Target and Equifax are.

Currency Risk

The U.S. government is now over 20 trillion dollars in debt. Here is a detailed article on the relationship between sovereign debt and inflation:

http://www.nationalaffairs.com/publications/detail/inflation-and-debt

The policy of many nations to inject new money into the economy lowers currency value and therefore your purchasing power.

Solution:

Bitcoin is limited in its issuance to a total of 21 million coins. Ever.

Your fiat currency assets may be seized by financial institutions or government

Solution:

If your money is kept in a bank it can be frozen by the bank or government if you find yourself suspected of a crime (even if later proven innocent).

Your home can be invaded by police or federal agents for the same reason.

Bitcoin can be protected against these possibilities.

Settlement across national borders is not easy

Solution:

Bitcoin can be effortlessly moved across borders.

Billions of unbanked

Solution:

No bank is required to store your funds. You can be your own bank with Bitcoin.

https://www.cnbc.com/2015/07/05/can-bitcoin-help-the-worlds-unbanked.html

Wrap up:

Bitcoin addresses some of the shortcomings in the financial system that we use currently. As it becomes more widely known and used, Bitcoin enthusiasts believe it may not just complement, but replace the current system.

Relevant Links:

Original Bitcoin Whitepaper

Buy Bitcoin from Coinbase

 

As a philosophical technologist, Hari is concerned with emerging innovations and how they impact our life. Mr. Seldon spends much time separating the outstanding from the paltry and incorporating only holistic beneficial technologies into his life.