Charles Hoskinson Explanation: How the Byron to Shelley wallet transition will work
On April 21st 2020 Charles Hoskinson sat down for an update on how Cardano will move from Byron to Shelley.
Quick Summary:
-All Cardano wallets will be migrating over to a BECH32 format.
-Only Cardano wallets operating on BECH32 will be able to delegate and vote.
-The process for transitioning to Shelley during the upgrade phase will be laid out in a step-by-step guide.
-Writing down and protecting passphrases is absolutely crucial to transitioning to Shelley.
-Ledger support and paper wallet support will be available during the update.
Clarifying the transition
We would like to clear up questions about the migration from Byron to Shelley as well as how ITN rewards will be transferred over. At the moment, there are three sets of assets which need to be managed in terms of the transition. In the history of Cardano there is Cardano SL, The Byron reboot, and then Shelley. The code during the SL era was constructed by a firm named Serokell in 2017.
Serokell created unique code and random index HD wallets. These are large, with addresses hundreds of digits long. During the SL period we introduced a new address type which is used by Yoroi. This address type is about half the size and they are sequential indexed HD wallets. So if you compare a Yoroi address and a Daedalus address they look different. At this point Daedalus understands both and we have software that manages both.
Byron to Shelley
The Byron reboot is the road to Shelley. It understands the legacy addresses from Serokell and those from Yoroi. It can operate on these two things. We have turned on the legacy support for Serokell because we didn’t want to confuse people by using Yoroi wallet addresses. However when Shelley comes out we have a new address called BECH32. We believe that the BECH32 format is a good way of future proofing Shelley wallets.
When users migrate their wallets to Shelley they will have an option to move their Byron wallet. That will be built into the GUI of the wallet itself in the form of a button. There will then be a step by step guide. Users will have to enter their spending password. They will then have to create a new wallet. All BECH32 wallets will have their own wallet recovery phrase just like the old Byron addresses. However, they will be 15 words in order to improve the security.
New formats
Once creating the new wallet and entering the spending password for the old wallet, funds will migrate over from the old wallet to the new address. We are deprecating the old Yoroi and Serokell addresses. Under the new Shelley ledger rules they will only be able to spend to a BECH32 address. This means that people will transition to the new wallets over time unless they have lost their passwords. The reason for this is because only BECH32 addresses can vote and stake.
Once creating a new wallet and entering a spending password, users will be walked through the transition process screen-by-screen. They will also receive their 15 word pass code which everyone should write down and store in a secure place. Then funds will be migrated to the new wallet.
If users have forgotten their spendings password there will be an option to restore their Byron wallet using their recovery phase. There are two paths here. Either users will have to restore their wallet from Byron or they will have already upgraded and therefore should have access to their spending password.
The ITN transition
The previous incentivized testnet involved staking. It gave rewards for the work of staking. There has been a question of how the rewards will transfer from the full blockchain of the ITN. All the staking rewards are aggregating into the UTXO of the ITN. We have an algorithm which will scan the UTXO and then create a snapshot of all the rewards. When Shelley is launched the snapshot will be appended to the Cardano blockchain. This means new accounts will be migrated over.
In Daedalus there will be a button to redeem ITN rewards. Users must enter their ITN wallet recovery phrase. It will then rotate user funds to a wallet on Shelley. We could technically reuse the recovery phrase or create a new wallet. We will discuss this from a UX perspective soon. From the Daedalus experience, users will have up to two wallets a migrated Byron wallet which has become a Shelly wallet, and a redeemed ITN rewards wallet.
To achieve this, users will need their ITN wallet recovery phrase. The wallet that users were staking from has a recovery phrase which must be input in order to recover the funds. We are taking a subset of data from the ITN and merging it with the Byron records to create Shelley. We don’t have private keys on the Byron side. No one from IOHK has the ability to help users if they have lost their wallet recovery phrase from the ITN. If users do not have this we recommend filing a help desk ticket. All IOHK can do is to merge the ITN history with the Byron history. The user must maintain their own password.
Recap
There are many different address and wallet types in Cardano. We are deprecating the old ones and moving to a BECH32 standard. Only BECH32 wallets will be able to stake and vote on Shelley. Migration will be straightforward, there will be a migration option which appears after the hard fork. After this, there will be a step-by-step guide to bring ITN rewards into the new wallet. The new 15 keywords must be written down to ensure future safety.
Rewards from the ITN can be confirmed at the balance check Haskell Shelley testnet. Users will be prompted to redeem their ITN rewards only if they have their ITN recovery phrase. There is a possibility that we will have Charles Morgan our director of cyber security, give some advice via video for safekeeping pass-phrases. Once the balance check Haskell Shelley testnet is concluded we will launch mainnet Shelley.
Once we launch mainnet Shelley the copying has not been done yet. At this point we will be in the upgrade window. The previous history exists and the client will be aware of it but it will be operating under the Byron ledger rules. Once we do a hard fork, the protocol will no longer care about Byron and it will operate under Shelley rules. This will allow redemption of ITN rewards, staking, delegating, and rotating rewards.
Hardware questions
We are completely redoing the paper wallet experience for Daedalus. For ledger there will be a firmware update which is scheduled for the launch of Shelley. This will give Shelley a user interface for ledger. That user interface will have a step-by-step guide to help ensure that the ledger device is working. This is a management window. It allows people to originate commands but they must be confirmed on the ledger device itself.
In terms of paper wallets an import will be necessary. There will be an import function and users will be able to import into a Shelley wallet. There users will be able to generate another paper wallet and transfer their funds. We can rotate from one address to another address type on a ledger, but this is not possible on a paper wallet. This rotation is necessary on a paper wallet so that cold staking is possible. Cold staking will not work on the old address.
IOHK will do a dedicated video on ledger and paper wallets. IOHK encourages everyone to download Daedalus flight if they are interested in early access. They believe that the upcoming user experience will be greatly refined and we are looking forward to working with the new address format. Migration should be a clear step-by-step process. Charles Morgan will create a video on best practices for storing pass-phrases.