3, To counter hackers who target cold wallets, it is necessary to logically and thoroughly examine the process of sending coins.

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.

To counter hackers who target cold wallets, it is necessary to logically and thoroughly examine the process of sending coins.

Let’s use a simple example to explain.

1. Address An address is like a piece of paper that you hand over to someone, saying, “Send the coins here.” On that piece of paper, the “address ID” and “conditions to make the piece usable” are written. Of course, when you receive coins, you hand over your piece of paper, and only you can fulfill the conditions to make it usable. You hand over your piece of paper that you can unlock to the other person.
   
2. Sending Coins When sending coins, you unlock the piece of paper that you can use (i.e., your balance) and record the amount of coins to be sent on the piece of paper you received from the other person. Here, this piece of paper is “single-use,” so once it is used, it becomes invalid, and its balance becomes zero. Therefore, if there is any change, you cannot return the change to the original piece of paper. Instead, you prepare a new piece of paper for yourself and record the change balance on it. This way, the balance is divided between the other person’s piece of paper and your change piece of paper, thus completing the coin transfer.
   
3. Receiving Coins When you receive coins, the piece of paper is added to your balance. Since the other person added to your balance, it increases accordingly. The wallet automatically calculates the balance of such pieces of paper and reflects it in your total balance. When using coins, the process is the same as “2. Sending Coins,” and the amount sent is deducted.
   
4. Signing the Summary of Inflows and Outflows This system needs to be self-contained between you and the other person. If a third party could manipulate it at will, it would collapse immediately. Therefore, by summarizing the inflows and outflows of the pieces of paper and signing that summary, you can prove that the transaction was indeed carried out by you who signed it. In this signing process, “private keys” and “public keys” are used.

In summary, this is how it works. Steps 2 and 4 are somewhat complicated, but these are the areas that hackers target.