The rate of cryptocurrency adoption is increasing on a daily basis hence the increase in the rate of transactions. However, one major concern among crypto traders and which is of utmost importance is “security”. Most of the exchange platforms for trading and transfer of cryptocurrency have set up different security measures for their users, like 2-factor authentication, etc.
In this article, we will talk about one of the security measures, known as a “Private key”. Let’s get started.
What Is A Private Key?
A private key, sometimes called a secret key, is an encrypted variable used with an Algorithm for encryption and decryption purposes. This secret key gives access to cryptocurrencies held in the exchange wallet in the form of an access code or password. So, anyone who has access to the private key is the recognized owner of that wallet account and has total control over crypto holdings in the wallet.
Forms of Private Keys
Different cryptocurrency exchange platforms make use of different forms of algorithms for the generation of private keys. The forms of private keys include:
- 64 digital hexadecimal code
- 256 character long binary code
- QR Code
- Mnemonic phrase
Whichever form they take, a private key is the only way you can claim ownership or carry out activities in your cryptocurrency wallet or public address.
There is a possibility that two wallets will have the same private key. Although the chance of this is very negligible, that doesn’t overrule the chance of it happening.
What Characteristics Should Your Private Key Emulate?
There are two important features a private key must exhibit: randomness and length.
The randomness is in its character. Although they should be keyboard accessible, they ought to be unpredictable by other people. These random selections can consist of strings of alphabets, numbers, and special characters.
The length makes it even harder to guess. No amount of luck would enable a person to guess a 256 character long Private Key in the correct order.
Why Do Private Keys Exist?
Irrespective of the form in which they are generated, this key plays an important role in ensuring that your cryptocurrency wallet is very secure. Usually, these numbers come in very large or uneven patterns. All these are to ensure that they cannot be predicted either by a person or by algorithms.
It acts as a one-way trapdoor function. The slightest variation, for instance, misspelling a simple word like ‘gum’ as ‘Gum,’ can result in you getting locked out of your wallet.
Private Keys As “Digital Signatures”
Every transaction made from an address on a blockchain must be digitally signed, only after then, can it be completed. The Private key is used to generate a digital signature. This is used to ensure a safe and secure system for transactions because a valid signature can only be generated with the use of a Private Key.
A digital signature certifies that the transaction is authentic and that it has come from your address. So, if you lose your Private key, you will no longer be able to transact because all unverified transactions will not be processed.
How Do You Access Your Private Key?
Your Private key can be accessed through your cryptocurrency wallet. Some people might decide to trust their exchange network with their private key.
How Do You Protect Your Private Key From Hackers?
The purpose of a Private key is defeated once someone else gains access to the Private key. This is why it is important to protect Private keys. These keys can be stored in two ways:
- Online wallets
- Offline system
These wallets are also known as hot wallets. It involves using a virtual wallet to manage your Private Key. They are called hot wallets because they are stored online. Storing them online makes them easily accessible during crypto trading. Most times, cryptocurrency users are advised against storing their Private keys online because of hackers. But if you must store them online, choose an online wallet with a reputation for a good security system and even a 2-way Authentication Factor system.
This system is also known as a cold storage system. It involves storing them in a safe place offline. Some crypto users may decide to store them in a private computer that is not internet configured or by writing it on a piece of paper then keeping it in a secured location like a safe or deposit box. It is very effective against digital theft but also poses other risks.
Under no condition should you tell your Private key to anyone both online and offline. There’s also no cryptocurrency exchange that will ask for your Private key for any purpose like give aways or ICOs.
Since most organizations, government parastatals, commercial and private companies have adopted the use of cryptocurrency for their day-to-day activities, there are growing security concerns to reduce the susceptibility of all transactions to cyber theft or hackers.
The only way to have a seamless transaction on the cryptocurrency market is by securing the private keys. Your data and security online matter a lot.