There’s no shortage of stories of people who lost their cryptocurrency simply because they didn’t understand the importance of private keys.
A private key lets you access your cryptocurrency. Without it, there is no way to access your cryptocurrency. Sharing a private key can result in theft.
In this resource we explore what a private key is, steps to keep it safe and it’s important security features. We explore the key differences between private and public keys, and how this relates to crypto wallets.
About Private Keys
A private key is a unique string of letters and numbers which essentially functions as a digital signature that lets you access your cryptocurrency. Private keys are sometimes called secret keys.
Private keys are an important part of the cryptography process, which uses algorithms to encrypt data and keep your cryptocurrency secure. Think of a private as the code which lets you move your cryptocurrency.
It is important to never share your private key and keep it secret. If you were to share your private key, it would compromise your security, and possibly allow others to gain access to your cryptocurrency.
Private Key vs Public Key
Private keys are not to be confused with public keys, although they both contain a unique blend of letters and numbers.
Unlike private keys, which are never to be shared with others, a public key is published for everyone to see. The public key is used whenever you want to send or receive crypto.
For example, if you want to transfer cryptocurrency from one wallet to another, you would use your public key to ensure funds are sent to your wallet.
Think of it like sending an email—if you want to receive a message from a colleague, you will give them your email address and they will send it to you.
Importantly, it is impossible to figure out a user’s private address from their public address, due to the encryption methods used.
Private Keys & Crypto Wallets
Crypto wallets don’t actually store cryptocurrency. This is a common misconception. What crypto wallets actually do is store your private keys.
Cryptocurrencies live on the blockchain and are accessible only via your private key. This is why you should never share your private key, as doing so would allow others to possibly access your funds on the blockchain.
READ: What Is a Crypto Wallet?
So, we’ve learnt that wallets hold your private keys, which are then used to access your cryptocurrency on the blockchain. But what happens if something happens to your wallet?
Thankfully, you can retrieve cryptocurrency that may be corrupted or to restore a backup. You can do this by using a seed phrase.
This acts as a master key, allowing you to retrieve your private keys and therefore cryptocurrency. It is important we highlight that you should never store or save your seed phrase online. Instead, we strongly recommend you write it down by hand and store it in a safe place.
For maximum security, it’s widely advised that you hold any significant amount of cryptocurrency in a crypto hardware wallet.