Much of the difficulties associated with using bitcoin today have to do with what makes it so valuable in the first place. This is the fact that each individual has complete control of their money under this new financial system. Users are able to move money without permissions with cryptocurrencies like bitcoin, but this also means that users don’t necessarily have anyone to run to for help when something goes wrong.
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What are cryptocurrency keys?
Cryptocurrency keys are what allow cryptocurrency users to access their crypto holdings. Only the person who has the private key associated with a particular cryptocurrency address is able to spend the funds held in that address. Cryptocurrency keys are a bit like a username and password that you might find on a regular website.
Cryptocurrency public keys
Public cryptocurrency keys are used as public addresses to which cryptocurrency funds can be sent. This is analogous to the public address where you reside. It consists of a country, a city, the name of the street and the house number, in short, it is a destination. This analogy holds, because that’s exactly how a public address works. Public addresses, or public key, are the location or address that contains a certain amount of cryptocurrency.
Cryptocurrency Private Keys
Private cryptocurrency keys are basically the passwords of the cryptocurrency world. These cryptographic keys allow you to access your cryptocurrency within your wallet and be able to send the funds to other addresses.
There is a common saying in the cryptocurrency space, “Not your keys, not your encryption.” The keys that are discussed in this sentence are private cryptocurrency keys. For example, if you have bitcoins on an exchange, then the exchange is actually holding the private keys on your behalf. From the point of view of the bitcoin network, it is the exchange that is actually the owner of the bitcoin associated with the private keys.
Keeping the address analogy, private keys are very similar to metal keys that allow you to access your home. You can only access and move items in your home if you have the metal private key associated with the public address.
Can I lose my keys?
Yes, you can definitely lose your keys. This has been a common problem in Bitcoin and other cryptocurrency networks, although more security solutions come online every day.
You should treat the keys associated with your Bitcoin wallet as an important legal document. There is no way to recover a lost key, so it is imperative to write down the key several times and store it in safe places, such as a fireproof safe. It is extremely important to understand this additional layer of personal responsibility that comes with cryptocurrency.
What is the best way to store my keys?
Currently, the best and safest way to store cryptocurrency keys is through some sort of offline configuration. Of course, the level of security you want to have with your cryptocurrency holdings will depend on how much cryptocurrency you own. Obviously, it wouldn’t make sense to buy a $100 hardware wallet to guarantee $10 worth of bitcoin.
If you are someone who just wants to buy some bitcoin and then hold it for five or ten years, then we recommend using some sort of offline process to store your funds, whether it’s a paper wallet or a hardware wallet. You will also need to make sure that you do not have a single point of failure in the configuration. For example, you don’t want to just write your private keys on a piece of paper and then put it in your socks drawer, at least not if you’re putting a non-trivial amount of money into the cryptocurrency space. Instead, you’ll want to break your private key into multiple pieces that can be placed in different locations. You’ll also want to have backups of each piece of the overall cryptographic puzzle available in case something goes wrong.
For those with extremely high amounts of Bitcoin or other cryptocurrencies, there are companies, such as Home, that can help you manage your holdings and ensure you’re able to keep them safe.
Do all coins have public and private keys?
All cryptocurrencies work with the concept of public key cryptography. If a coin didn’t work this way, then it wouldn’t really be a cryptocurrency, and it would probably be possible for some third parties to move funds into the system as they see fit.
Every single coin in a cryptocurrency network does not necessarily come with its own pair of public and private keys. Instead, the addresses where cryptocurrencies are stored have public and private keys.
How do I see my private keys?
These days, there’s usually no reason to see your actual private keys. In most cryptocurrency wallets, you are given a phrase of 12 or 24 words to remember or keep in a safe place, and that effectively acts as a private key.
If you want to see your real private keys, you can sometimes do so through the settings of whatever wallet you’re using. However, some wallets don’t even offer an option to see your private keys at this point.
Of course, if you’re using a custody wallet, there are no private keys to see because someone else holds the funds on your behalf, similar to how a traditional bank works.
