What will you do if you lose all your bitcoins in the next 24 hours?
You’ll probably be dismayed, isn’t it!
But, if you own your crypto wallet’s private keys, your bitcoins will remain safe with you.
Wondering, what’s that? In this article, let’s understand this concept.
A notion of Private & Public Keys
To comprehend how crypto transactions run, you must first understand how public and private keys work.
Bitcoin and other cryptocurrencies rely heavily on public and private keys to function. They let you send and receive cryptocurrencies without the need for third-party verification. The public-key cryptography (PKC) framework consists of these keys. You can send your Bitcoin to anybody, anywhere, with these keys.
As a key pair, the public and private keys fit together. You can share your public keys to accept transactions, but you must keep your private keys confidential. Anyone who has access to the private keys also has access to any cryptocurrency linked to those keys.
Importance of two-key system
The two-key system operates on the following principle: you can accept transactions with the public key, but you should send them with the private key.
Asymmetric cryptography, a crucial feature of a blockchain, uses two separate keys (a public and a private key). In mathematical form, the two keys are linked together.
The private key is the source of the unique public key. Users can use this link to generate unforgeable signatures that can only be authenticated by other network participants who have access to the relevant public key.
Private keys: An overview
Cryptocurrency is governed by digital keys and addresses that reflect virtual token ownership and control. Any public address may be used to deposit bitcoin or other tokens. However, even if tokens are placed into a user’s address, they cannot be withdrawn without the unique private key.
Private keys come in a variety of shapes and sizes. A private key in regular base-ten notation would be hundreds of digits long–so lengthy that brute-force cracking would take years. Private keys are often stated as a string of alphanumeric characters for ease of use.
A complex mathematical procedure generates the public key from the private key. However, establishing a private key from a public key is very hard to reverse the procedure. The public key is then used to generate a receiving address using a similar process.
Let’s consider the address to be a mailbox and the private key to be the box’s key.
Letters and small items can be inserted through the opening in the mailbox by the postal carrier, or anybody else for that matter. Therefore, the only person who has access to the mailbox’s contents is the one who has the unique key. As a result, it’s critical to keep the key safe since if it’s stolen or lost, the mailbox’s security might be jeopardised.
To learn a step-by-step procedure to set up your bitcoin wallet, click here.
Uses of the private keys
A private key, like a password, is an enormously big integer used in cryptography. Digital signatures that may be easily validated without exposing the secret key are created with private keys.
In bitcoin transactions, private keys are also used to prove ownership of a blockchain address.
Importance of private keys
One of the cryptographic inventions that make digital money viable and secure is the concept of public and private keys. Here’s how it works.
- Cryptocurrencies like Bitcoin and Ethereum are decentralised, which means that a bank or any other entity does not hold your digital money in the middle. A blockchain system, on the other hand, spreads your cryptocurrency across a network of servers. Crypto blockchains are open, with every public key and transaction information visible to anybody.
- According to some complex mathematics, your public key is created by your private key, which makes them a matched pair. When you perform a transaction with your public key, you use your private key to confirm that it’s genuinely you.
- Even while everything is public, it is anonymous; you don’t have to give your name, address, or other personal information to use cryptocurrencies.
- Take, for example, Bitcoin. Even while anybody with a private key can see when Bitcoin is purchased, sold, or used, only that key holder can complete the transaction.
How to store your private keys?
It’s just as essential to keep your private keys safe to preserve any password. The following are the two main methods for keeping track of them:
- Store them online in a crypto wallet: For most users, using a virtual wallet to store their private keys is the best and easiest solution. These are known as “hot” wallets since your private keys are stored on the web. This makes purchasing, trading, and utilising digital money as convenient and straightforward as using a credit card on the internet.
Point to be noted – Choose a wallet from a reputable firm that offers security measures such as two-factor authentication.
- Store your private keys offline: Some investors prefer to keep their private keys on a computer that isn’t connected to the internet, scribble on paper, or even memorise. This is known as “cold storage,” While protecting your private key from digital theft, it makes accessing your Bitcoin much more complex and creates additional concerns.
The most crucial component in a Crypto wallet is your private key, which will show that the cryptocurrencies you claim as yours are, in reality, yours.
Many features of private keys are overlooked, including how difficult it may be to keep track of everything. One potential solution is to link it to digital identification, especially if it allows access to one’s wallets across several blockchains.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.