A private key is a complex form of cryptography that enables a user to access their cryptocurrency. It is a crucial aspect of Bitcoin and altcoins because its security make-up helps hinder malicious actors from accessing a user’s funds.
The term private key has been referenced severally in mainstream media. Here are two instances:
- “A long-standing Bitcoin key is about to be revealed”
Coindesk, June26, 2018
- “How to recover your wallet if your private keys are lost”
Cointelegraph Nov 16, 2018
Understanding Private Keys
When dealing with a cryptocurrency such as Bitcoin, you are given a public address and a private key (Bitcoin private key in the case of Bitcoin) to send and receive crypto coins. The public address is where you receive Bitcoin. But even though you have Bitcoin deposited in your address, you cannot withdraw them without using your Bitcoin private key.
Your public address (public key) is derived from your Bitcoin private key through a sophisticated mathematical algorithm. However, it is almost impossible to generate a private key from the public key.
Private keys are depicted as a series of alphanumerical characters that make it more difficult for a criminal to crack. Although they can take several different forms, most users represent their private keys in a wallet import format with 51 characters.
How Bitcoin Private Key Works
To better understand how a Bitcoin private key works, think of your Bitcoin wallet as a mailbox. Anyone can insert small packages and letters through the mailbox opening, but you are the only one who can open the mailbox and retrieve its contents.
Just like with the mailbox, other people can send you Bitcoin it only you can spend it using your Bitcoin private key.
Your private key is stored in a digital wallet. When you initiate a transaction, the wallet software processes it using your private key hence creating a digital signature.
The only way a valid signature can be generated is through the use of the correct private key. This process, therefore, upholds security. The purpose of the signature is to confirm that a transaction has come from a particular user and ensure that it cannot be changed once the transaction is broadcasted. If the transaction is altered, the signature has to change too.
Because only a private key can allow you to access your cryptocurrency, you must store it in a secure location. In case you lose it, you will be unable to withdraw, spend, or transfer your crypto coins.
Where to Store Your Private Key
There are several ways that you can store your private keys. You can use a hardware, software, paper, or desktop wallet. Software and desktop wallets are referred to as hot storage because they are always connected to the internet. Hardware and paper wallets are called cold storage because they store your private keys away from the internet. Cold storage is better than hot storage when it comes to keeping your private key safe.
Remember it’s important to keep your private key safe and never share it with anyone. Should a malicious actor get access to your private key, they can steal your crypto assets from anywhere.