It’s Just a Number – A Very Important Number
A private key is a complex type of cryptographic code that lets users gain access to their cryptocurrency. A private key is a core part of both bitcoin and altcoin, and its secure nature ensures that users are protected from theft and unauthorized access to their funds.
In effect, it is a string of characters that can be used in the encryption or decryption of a given algorithm. These keys have been a key part of crypto transactions since 2008, although wallets that have been developed more recently have been built with methods that allow users to operate them without having to understand the complexity of this software.
Guard Them With Your Life!
In essence, the ownership of the private key of a wallet means that you are the owner of that wallet. In other words, anyone who has access to a wallet’s private keys can use it to send a transaction. Any entity who possesses a private key can create a valid transaction.
Many opportunities are available for those who want to steal private keys. The most common tend to be storage media and communications channels. Because of this, one must be very cautious whenever storing or transmitting private keys.
Software wallets normally take care of private keys in a “wallet file” that can be kept anywhere data is stored. By default, a computer will store this file in a standard, well-known directory when the wallet software is installed, making it a primary target for malware that targets crypto.
To combat this threat, software wallets provide users with the opportunity to encrypt the wallet file. Any hacker attempting to gain access to the wallet file would then need to decrypt it. The complexity of doing this varies on the quality of the encryption and strength of the password being utilized. Most wallet files can be encrypted on software wallets via the simple addition of a password.
Many crypto users choose to back up their wallet files. While this is generally a good idea, this practice has the potential to leak private keys. For example, it can be tempting to save a backup of your software wallet to a cloud storage service. However, anyone able to view this backup online would be in a position to gain access to some or all of your funds.
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A very similar problem can come about through emailing backups to yourself or leaving a private key around at your house. Encryption can reduce the risk of compromise, but can’t keep you completely safe.
Private Keys are Used to Sign and Send Crypto Transactions
To prevent forgery, the Bitcoin network ensures that each transaction has a “digital signature”. This signature, like a private key, is just a number selected from a very large range. Wallet software produces a signature by mathematically putting forward a transaction together with the appropriate private key.
This system is functional because anyone with a transaction and its signature can be sure of the authenticity of a message. However, a transaction signature is almost impossible to fake. The possible way to create a valid signature for a given transaction is to utilize the appropriate private key.
As opposed to a signature you would write in real life, a transaction signature changes if the transaction changes even a little bit. The way the signature will change is impossible to predict, making sure that only a person in possession of a private key can provide the correct signature.
Private Keys Are Used to Make Public Addresses
Public key cryptography is often utilized to secure electronic communication over an environment with an open network, an example being the Internet, without having to rely on a hidden channel. They make messages unreadable, working with private keys to ensure security.
A public key comes from encrypting a private key with a set of mathematical equations. They work together in a sort of mathematical trapdoor, something you can function that’s easy to perform in one direction, but cannot in the other. This uni-directional trapdoor is at the core of Bitcoin’s security model.
No network is required at any point in the creation of a private key or the address. Every computer on the Bitcoin network is aware of the complex mathematical relationship between public and private keys. This enables every member of the network to choose private keys and sign transactions in separation to the Bitcoin network. The huge private keyspace enables that any properly-selected key will be unique.