What is a Private Key? Should you have one? Learn more about Bitcoin Private Keys
A private key is a sophisticated form of cryptography, which allows a user to access their cryptocurrency.
We have had many iCE3X users ask us what private keys are and whether or not they should get one. We have put together this blog post for our users to understand private keys better. Make sure you carry out further research and practice before making use of yours.
The simplest explanation of a private key in the context of Bitcoin is:
A private key is a secret number. This “number” will allow you to spend your bitcoins. Every Bitcoin wallet contains one or more private keys, which are saved in the wallet file. The private keys are mathematically related to all Bitcoin addresses generated for the wallet.
Because the private key is the “ticket” that allows someone to spend bitcoins, it is important that these are kept secure. Private keys can be kept on computer files, but in some cases are also short enough that they can be printed on paper.
What is a Public Address (or key)?
This is another alphanumeric address/number. You derive this number from private keys only, by using cryptographic math functions. One can not reverse engineer the public address in order to reach the private key from which it was generated.
A wallet owner will use this address to publicly receive bitcoins.
This what the standard Bitcoin public address looks like (it always starts with 1):
You use the address to broadcast and receive coins, furthermore, users can make as many public addresses as they want to receive bitcoins.
How does the Bitcoin network use private keys?
Private keys make irreversible transactions possible. That’s right, you can not reverse these transactions. Once it is sent it is spent.
They are the key to spending and sending your bitcoins to anyone and anywhere. The Bitcoin network will link mathematical signatures to each transaction whenever we use the private keys to send bitcoins. These signatures are responsible for guaranteeing the irreversibility of a bitcoin transaction.
For each transaction, these signatures are unique. We may generate them from the same private keys, but they are still totally unique. This feature makes them impossible to copy. The user can confidently use the same private key again and again.
How do we keep private keys safe?
If you don’t really understand all the technical stuff, that’s fine! You can still use Bitcoin, just make sure you always keep your private keys safe!
The Bitcoin network will accept any valid transaction bearing a valid signature. At the same time, any person in possession of a private key can sign a transaction. When you combine these two facts the result is stark. If someone has your private key they can steal your bitcoin.
Do you need a safe to keep private keys safe?
Many users prefer to use a hardware wallet to store their private keys. This way, you do not interact with the private keys, but rather use the hardware wallet interface.
You have to ensure that you keep your private key safe, many software wallets usually store private keys in a “wallet file” on the main hard drive. Wallets often place this file in a standard, well-known directory, making it an ideal target bitcoin-specific malware.
To counter this threat, software wallets offer an option to encrypt the wallet file. An attacker gaining access to your wallet file would then need to decrypt it. There are many methods of encryption. If you use stronger encryption and longer passwords it will require, more resources to decrypt (if possible at all). You can encrypt many software wallets using a password or pin code.
If you want to know more about Private and Public Keys, watch this video:
In conclusion, REMEMBER the following:
- If you don’t back up your private key and you lose it, you can no longer access your bitcoin wallet to spend funds.
- Anyone Who Knows Your Private Key Can Steal Your Funds
- Security Depends on Choosing a Good Private Key
- You can transform a private key, which is just a number such as 42, mathematically into a public key. You then convert it into an address. Each step is irreversible.
- Always do your research if you are unsure of the technical details.
What is your prefered method to store and manage private keys? Have you thought about using a managed custodial wallet and do you know the risks involved in doing so?
We would love to hear your opinion so feel free to comment below.