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How can I keep my private keys safe, and why is it so important?

October 15, 2018

What is a private key?

In the world of blockchain, private keys refer to a unique combinations of numbers and letters that users need to get access to their wallet. The user who knows the private key fully controls the coins in that wallet. For this reason, the ‘keys’ should not be shared with outsiders, unless you want someone to have control over your money.


You said ‘unique’?

Yes. A private key for Bitcoin, for example, is a series of 32 bytes. This may not seem like much of a selection, but for practical purposes it’s essentially infinite. For example, here’s a private key represented in WIF format: 5KJvsngHeMpm864wtkJNzQGaCErckhHUBGFsvd3VyK5qMZXj3hS


So… it’s like a password?

Yeah, kind of. If to take it further, the ‘keys’ are used to generate a signature for each blockchain transaction to be sent out. By signing the transaction, you confirm that you are the rightful owner of the wallet and let the recipient get crypto via the public key.


And what is a public key?

Basically, it is your wallet address. You can also think of it as your bank account number. When you are ready to send/receive money or to make a purchase, you do so by giving the other party this number.


Do I need to generate private/public keys?

Most of the time you don’t. For example, if you use a web wallet like Coinbase or Blockchain.info, they create and manage the private key for you. It’s the same for exchanges.


Where should I store my private keys?

One of the common ways to keep your private keys safe is by using a ‘cold wallet’. This type of storage implies keeping the data offline on your computer or an encrypted USB stick. What makes the ‘cold wallet’ immutable to cyber-attacks is that it lets you generate transactions without connecting to the internet.


And what’s a ‘hot’ wallet?

Technically the difference is that hot wallets are connected to the internet while cold wallets are not. If you have a hot wallet it is far more vulnerable to being hacked. At the same time, hot wallets are more conviniet in terms of usage - you can access and move your funds on the go. 


Should I consider getting a hardware wallet?

If the value of your assets feel like a fairly significant amount for you, you definately should. While this type of wallet might not have a user-friendly interface, it provides the best balance of price and security. The wallet is never connected to the Internet, however, you can interact with it wirelessly through the companion app.


What if lose my private keys?

Hmmmm…. you better not to. The keys are unrecoverable by their design so is you lose them, it will be impossible to get your coins back.

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