2, Let’s delve into the in-depth analysis of the coin outflow (Part 1). The notion that cold wallets are absolutely safe because they are not connected to the network is incorrect. Cold wallets are still connected to the network.

There has been another leakage incident. However, there is an effective method that can surely prevent leakage (hacking). But why does this method work? We will explain the theoretical aspects thoroughly and reveal the solution at the end of section 9.

There is a concept that cold wallets are completely secure because they are physically disconnected from the network, making access impossible. However, this is not true.

Due to the nature of blockchain, even cold wallets are connected to the network. In other words, there is no way to completely disconnect from the network. However, there is one situation where you can create a state that is “almost disconnected from the network,” and for large amounts, it is absolutely necessary to place coins in that state (only then is it secure). This will be explained through this analysis (up to Part 5).

Why are cold wallets connected to the network? The reason lies in the blockchain mechanism. Since coins are locked and unlocked using private and public keys, private and public keys are inevitably operated as a set.

A cold wallet means completely isolating the private key from the network. However, since the public key is public as the name suggests, “the public key” and “the information to process that public key” cannot be isolated from the network, and even cold wallets remain exposed via the blockchain. This is why there is a mechanism that allows access to cold wallets.

The issue is not so much the public key itself but rather that the information needed to process the public key is also “public.” Hackers are constantly targeting this. While public key cryptography like elliptic curve cryptography is safe because the discrete logarithm problem prevents deriving the private key from the public key, the fact that the information to process the public key is “public” means there might be minimal clues for decryption, creating a slight vulnerability.

Incidentally, the moment a cold wallet is accessed in this manner, all security measures are nullified. Therefore, it is not a matter of security probability but rather akin to being involved in a catastrophic airplane crash.

In such a situation, no action on the wallet will be effective (protecting the wallet with a passphrase, for instance, becomes meaningless). Moreover, since direct access to the cold wallet is unnecessary, firewalls and similar measures are entirely ineffective (even isolating the private key from the network becomes futile). Hence, all the funds present will be drained, leaving no option but to accept the loss.