What Is a Private Key?
A private key is a secret number that is used in cryptography, similar to a password. In cryptocurrency, private keys are also used to sign transactions and prove ownership of a blockchain address.
A private key is an integral aspect of bitcoin and altcoins, and its security makeup helps to protect a user from theft and unauthorized access to funds.
Key Takeaways
- A private key is a secret number that is used in cryptography and cryptocurrency.
- A private key is a large, randomly-generated number with hundreds of digits. For simplicity, they are usually represented as strings of alphanumeric characters.
- A cryptocurrency wallet consists of a set of public addresses and private keys. Anyone can deposit cryptocurrency in a public address, but funds cannot be removed from an address without the corresponding private key.
- Private keys represent final control and ownership of cryptocurrency. It is vitally important to prevent one's private keys from being lost or compromised.
Click Play to Learn All About Private Keys
Understanding Private Keys
Cryptocurrency is controlled through a set of digital keys and addresses, representing ownership and control of virtual tokens. Anyone can deposit bitcoin or other tokens in any public address. But even though a user has tokens deposited into their address, they won’t be able to withdraw them without the unique private key.
Private keys can take a few different forms. In ordinary, base-ten notation, a private key would be hundreds of digits long–so long that it would take years to crack a private key by brute force. For simplicity, private keys are usually expressed as a string of alphanumeric characters.
While it is trivially simple to create a public address from a private key, the reverse is almost impossible. This may change one day due to quantum computing.
The public key is created from the private key through a complicated mathematical algorithm. However, it is near impossible to reverse the process by generating a private key from a public key.A similar algorithm is then used to create a receiving address from the public key. Think of the address as a mailbox, and the private key as the key to the box.
The mail carrier, and anyone really, can insert letters and small packages through the opening in the mailbox. However, the only person that can retrieve the contents of the mailbox is the one who has the unique key. It is, therefore, important to keep the key safe because if it is stolen or lost, the mailbox can be compromised.
Digital Wallets
While private keys are essential to cryptocurrency, it is not necessary for a user to create or remember their own key pairs. Digital wallets are used to automatically create key pairs and store them safely. When a transaction is initiated, the wallet software creates a digital signature by processing the transaction with the private key. This upholds a secure system since the only way to generate a valid signature for any given transaction is to use the private key.
The signature is used to confirm that a transaction has come from a particular user, and ensures that the transaction cannot be changed once broadcasted. If the transaction gets altered, even slightly, the signature will be incorrect.
If a user loses their private key, they can no longer access the wallet to spend, withdraw, or transfer coins. It is, therefore, imperative to save the private key in a secure location. There are a number of ways that a digital wallet that contains a private key can be stored. Private keys can be stored on paper wallets, which are documents that have been printed with the private key and QR code on them so that they can easily be scanned when a transaction needs to be signed.
Private keys can be stored using a hardware wallet that uses smartcards or USB devices to generate and secure private keys offline.
The private keys can also be stored using a hardware wallet that uses smartcards or USB devices to generate and secure private keys offline. An offline software wallet could also be used to store private keys. This wallet has an offline partition for private keys and an online division that has the public keys stored. With an offline software wallet, a new transaction is moved offline to be signed digitally and then moved back online to be broadcasted to the cryptocurrency network.
These types of storage mentioned above are called cold storage, as private keys are stored offline. The other type of wallet, hot wallet, stores private keys on devices or systems that are connected to the internet. Examples of these wallets include desktop wallets (e.g., Electrum), mobile wallets (e.g., Breadwallet), and web-based wallets (e.g., Coinbase).
How Do Private Keys Work?
A private key is an extremely large number that is used in cryptography, similar to a password. Private keys are used to create digital signatures that can easily be verified, without revealing the private key. Private keys are also used in cryptocurrency transactions in order to show ownership of a blockchain address.
What Is the Best Way to Store Private Keys?
Private keys can be stored on computers or mobile phones, USB drives, a specialized hardware wallet, or even a piece of paper. The ideal form of storage will depend on how often you plan to use your cryptocurrency. A password-protected mobile phone or computer is the most convenient way to store cryptocurrency for everyday use. For long-term or "cold" storage, private keys should always be kept offline, ideally on devices that have never touched the internet. Even printers can be compromised. Hardware wallets can facilitate cold storage by signing transactions in a way that does not compromise the private keys.
Should You Trust a Custodial Wallet?
A custodial wallet is a third-party service that allows users to store cryptocurrency, similar to a bank. This allows users to skip over the complication of private key storage, relying instead on the technological expertise of the company offering the service. However, there are tradeoffs. Custodial wallets are often targets for hackers or phishing scams, and they can also be seized or frozen by legal authorities. The best solution is to determine what type of wallet fits your individual risk tolerance and technological skill.
FAQs
The most secure method of storing your private keys is to use some form of cryptographic hardware storage device. While they can be expensive, tools like Hardware Storage Modules (HSM), Smart Cards, or USB tokens are great lines of defense against an attack.
What is the most secure way to store your private key today? ›
#1 – Hardware Storage
The best way of securely storing private keys is to use a cryptographic hardware storage device such as: USB Token. Smart Card. Hardware Storage Module (HSM)
Do I need to store my private key? ›
Therefore, similarly to keeping your online banking information safe, you must keep your private keys safe, otherwise, anyone with the keys can “log in” (access) your “account” (wallet) and drain it of your funds! Your private keys control your funds, so it is important to keep them secret.
What are the best ways to store crypto keys? ›
In short, hardware wallets are the most secure option for storing your crypto, both because they keep your private keys safe in an offline environment and because they offer certainty about your transaction details via their tamper-resistant screen.
How can we avoid the loss of private key? ›
3 Ways to Protect Your Private Keys
- Use a Random Key/Passphrase. In order to use your blockchain account, you need to be able to remember the private key (or have something remember it for you). ...
- Maintain Control of Your Keys. ...
- Use a Hardware or Offline Wallet.
You should make at least a few copies of your private key backup and put them in separate physical locations. In case you lose or damage one copy, another one will help you to restore access to your wallet. Never share the info on your private keys on social media.
Where should I store my private SSH key? ›
SSH keys are typically configured in an authorized_keys file in . ssh subdirectory in the user's home directory. Typically a system administrator would first create a key using ssh-keygen and then install it as an authorized key on a server using the ssh-copy-id tool.
Where are private keys usually stored? ›
A CA's private key should be stored in hardware-based protection, such as a Hardware Security Module (HSM). This provides tamper-resistant secure storage. A Private key for an end entity could be stored in a Trusted Platform Module (TPM) chip or a USB tamper-resistant security token.
Can you crack private key? ›
While private keys are tremendously secure, Blockchain passphrases (or seed phrases) are less robust against cracking. Note here that “less” is relative — passphrases are still mathematically impossible to guess, but several factors might make them a viable target.
Can a private key be recovered if lost? ›
Key Recovery can be used to re-use or restore a users private key. Key recovery means that server generated keys (and the certificate) of a user is stored, encrypted, in the CAs database. The purpose of this is to be able to recover an encryption key if the user loses the key.
The public and private keys fit together as a key pair. You may share your public keys in order to receive transactions, but your private keys must be kept secret. If anyone has access to the private keys, they will also have access to any cryptocurrency associated with those keys.
Who keeps the private key? ›
The private key however belongs to only one person. There are several well-known mathematical algorithms that are used to produce the public and private key.
How do I backup my private keys? ›
To back up a Certificate Services private key, use the Certification Authority MMC snap-in, or the certutil command (with -backup or -backupkey specified). Backing up the private key with the Certification Authority MMC snap-in or certutil results in the private key being written to PKCS #12 file.
How do I backup my crypto private key? ›
Follow these four steps to save your software wallet to the cloud.
- Export Your Private Keys. In the wallet you want to export, click “wallet” to open a dropdown menu, choose “private keys” and then select “export.”
- Set the File Path. ...
- Find the Wallet Backup File. ...
- Move the File to Somewhere Safe.
Users can lose bitcoin and other cryptocurrency tokens due to theft, computer failure, loss of access keys, and more. Cold storage (or offline wallets) is one of the safest methods for holding bitcoin, as these wallets are not accessible via the internet, but hot wallets are still convenient for some users.
How do I keep my private key offline? ›
Private keys can be stored using a hardware wallet that uses smartcards or USB devices to generate and secure private keys offline. The private keys can also be stored using a hardware wallet that uses smartcards or USB devices to generate and secure private keys offline.
How are private keys kept private? ›
Private keys may be protected with a password, encrypted or hashed for security -- or all three. Key exchange. The private key is used to decrypt, as well as to encrypt, so using it for symmetric encryption requires a key exchange to share that key securely with trusted parties authorized to exchange secured data.
What happens if someone lost the private key of his wallet? ›
Please take note that if a private key is lost, there is no way to either recover it or to regenerate it. However, aside from the private key, there are also other ways you can use to import your wallet address and ultimately recover the tokens in them.
Is it safe to store private key in database? ›
Securely storing the private key.
Once generated, the private key must be stored securely. Like the symmetric cryptography process, keys may be stored offline or on the computer used to generate, encrypt and decrypt data. Here, too, private keys should be protected with a password, encrypted or hashed for security.
Is it safe to store private key in memory? ›
Keeping a private key in a keychain is a great way to secure it. The key data is encrypted on disk and accessible only to your app or the apps you authorize. However, to use the key, you must briefly copy a plain-text version of it into system memory.
Use hardware wallets to keep your private keys safe. A hardware wallet is a flash drive-like device designed to store your cryptoassets. These are HD wallets that generate private and public keys via mnemonic phrases or seed words when initialized.
