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Nano Ledger S is often referred to as a cold storage hardware wallet. If my understanding is correct, this device is kind of like a little transaction signing machine to be used in conjunction with other bitcoin client software. The device has "apps" (which I don't really understand) but I think the "app" is just specifying different cryptocurrencies. Here is my understanding - please let me know if any-step is incorrect.

  1. In order to use the device I need to link it with an actual bitcoin client or wallet service
  2. I have seen that they recommend using Ledger Live which appears to be a wallet service and an exchange, but the website says you could also link to electrum wallet.
  3. So I will use my desktop interface for some wallet / client software to input some details of a transaction (address to send to, amount of btc) and then it will prompt me to confirm the transaction from the device.
  4. The actual signing (or unlocking of my UTXO's, the part that requires my private keys) happens on the nano ledger device.
  5. When it is done preparing the entire tx message it sends this data back to my desktop, which is now safe since it has been signed already.
  6. The client / wallet software sends the tx data off to the network to get validated and mined.
  7. I can further use the wallet software on desktop to view valuable information like the aggregated value in USD (my native currency) of the UTXO's associated to the keys held on my ledger device, etc.

Some questions:

  1. Since my computer is not a node, how does my client software "send the message to the network". I presume I need to be connected to wifi. Then what?
  2. If ledger live is not a full node wallet, what is it querying to produce the information like my "account values".
  3. I have read that full node wallets are better because they don't require me to trust a third party. Can I link bitcoin core wallet to my ledger device?
  4. Is the idea here that when I view valuable information on my interface (like number of confirmations on a transaction, or value of my UTXO's), it is querying the full blockchain stored on my node instead of gathering information from someone else?
  5. Is ledger wallet or bitcoin core wallet coin selection algorithms known to public?
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Here is my understanding - please let me know if any-step is incorrect.

All correct.

  1. Since my computer is not a node, how does my client software "send the message to the network". I presume I need to be connected to wifi. Then what?

Ledger Live, I believe, just connects to Ledger's service, and it uses Ledger's node. If you care about privacy and/or don't completely trust Ledger, you should not use it.

  1. If ledger live is not a full node wallet, what is it querying to produce the information like my "account values".

Ledger's server.

  1. I have read that full node wallets are better because they don't require me to trust a third party. Can I link bitcoin core wallet to my ledger device?

Kind of, there has been work towards integrating hardware wallet support with Bitcoin Core, but it's not particularly user friendly yet (it's possible with 0.21 and the HWI project, but you'll need to use the command line to pass stuff around. This will improve in future releases.

  1. Is the idea here that when I view valuable information on my interface (like number of confirmations on a transaction, or value of my UTXO's), it is querying the full blockchain stored on my node instead of gathering information from someone else?

If you have that information yourself, sure - no need to trust anymore else.

  1. Is ledger wallet or bitcoin core wallet coin selection algorithms known to public?

Both are open source software, so you could just look at what they're doing.

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  • Thanks Pieter - I have a decent amount of experience with stuff like Python, R, git, and navigating around in the command line, but I definitely don't have experience with things like computer systems and networks. I'll look into the HWI project for fun but I would be hesitant about using it. Thanks for providing the link though. – Prince M Mar 13 at 1:10
  • Also for people who find my question and are also thinking about these concepts here is this: support.ledger.com/hc/en-us/articles/…. – Prince M Mar 13 at 1:12
  • I understand why the full node is more "autonomous" in that it verifies and queries information from my own locally stored copy of block chain, but why is it more private? What information is not being kept private by not using a full node / bitcoin core – Prince M Mar 13 at 3:30
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    You're asking some server for your transactions, that means they'll learn something. There are techniques for reducing how much information is revealed, but ultimately they will observe at least what transactions you fetch and which you don't. Papers have been written about using that to infer what addresses are yours. – Pieter Wuille Mar 13 at 3:33

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