What is a Bitcoin and crypto private key - how do you protect it?
Being a crypto investor is different than investing in any other asset. There’s no insurance for cryptocurrencies, and this requires that you be a dedicated custodian of your own assets. The most important aspect to this, of course, is learning how to protect your Bitcoin and other crypto holdings from people who would want to steal them from you.
There are plenty of ways to go wrong here, so a little knowledge goes a long way. If someone steals your cryptocurrency there’s no way of getting it back. So, in this article, we’ll talk about what private keys are and why you need to protect them.
Cryptocurrency private key meaning
The private key is the key to your Bitcoin or other cryptocurrency wallets. People who know this secret number are allowed to spend your Bitcoin! If anyone ever asks you for your private key, you should not give it to them, even if they claim to be from a development or a support team. Real team members will never ask you to reveal this information.
You don’t need this key in order to send money for purchases either, and anyone you give it to can take possession of the cryptocurrency in that wallet. Just like you wouldn’t hand over the key to your car to a stranger, the key to your Bitcoin wallet is just as important. Possibly even more so, because cryptocurrencies are not insured like your car.
How Bitcoin private key is generated?
In most wallets you’ll have the ability to generate a random hexadecimal string. Cryptographic functions create these random keys so that they can keep your funds safe, and to be absolutely sure only approved transactions are going through. Upon creating your new wallet for the very first time, this key should already be made for you.
If you are in need of access to your private key for backup purposes you can export it by dumping it from the wallet for safe keeping. It’s a good idea to do this to keep as a backup in case you were ever to lose access to your crypto wallets or your computer.
Is crypto private key encrypted?
In some cases yes, but that is not always the case. Your level of encryption will depend heavily on the specific wallet program that you are using to store your money.
Some wallets have different levels of encryption and security, and this is the reason that it’s so important to only use trusted and secure wallets to keep your cryptocurrencies safe. You should also be cautious of wallets with no reputation as they could be attempts to steal private keys and funds from the users.
How cryptocurrency private key looks like - Bitcoin example
A Bitcoin private key will look like this: 5Kb8kLf9zgWQnogidDA76MzPL6TsZZY36hWXMssSzNydYXYB9KF
While it looks very similar to a wallet address that you would use to pay for goods, they are very different, and you should keep them secret at all times! Handing over your Bitcoin private key is like giving a stranger a copy of the key to your home. They could come in at any time and rob you blind, and there would be nothing you could do about it.
Why private keys are important for crypto users
Private keys are important because not only do they verify that only you are making the transactions in your wallet, but they also act as a backup. If something were to happen to your host machine then you can easily import your private key information so you can restore access to your funds.
If you don’t have this key, then you will not ever be able to access your money. Many early investors have lost access to large sums of Bitcoin for this reason, never being able to recover it because they did not have an appropriate backup.
Can Bitcoin & crypto private keys be hacked?
It would be very difficult to hack cryptocurrency private keys in the manner that you’re probably thinking of, but you can still lose the ability to access your wallet in other ways. The most common are phishing attempts because they’re easiest, and the main reason that everyone says to never give your BTC private keys to anyone. It doesn’t matter who they are. If they are asking to have your private key, they want to steal from you.
You might also fall prey to malware which will try to break your user-created wallet password or steal your information directly from your PC. You should also be particularly careful about the sites you visit and the software you download, as it could contain malware looking to attack your wallets.
How do you store and protect your private key?
It’s not wise to store a bare private key of the crypto asset on your machine which accesses the internet. People can find these files and take it from you using malware or other attack vectors. Instead, put the file onto a thumb drive or other external storage device which is unplugged and not accessible. This will keep people from stealing your keys using malware.
If you have a safe, then this would be a great place to keep it. Never allow anyone to have access to the private key. It may even be a good idea to make multiple copies just in case the thumb drive becomes inoperable or is destroyed as well.
Private vs public keys
A public key is a receiving only address. When someone sends you Bitcoin or other cryptocurrencies, they are using this key to do so. It’s perfectly safe to reveal your public key to users, and there’s no risk of losing funds. Just don’t get the private and public keys mixed up.
However, people who have the public wallet address can sometimes see how much Bitcoin you have, sometimes making you a target. Many people store their funds in multiple wallets to avoid revealing the amount of money they have.