Keeping Your Private Keys Private
29 Nov 2018
What are private keys, and how can I keep my cryptocurrency holdings secure?
Storing digital assets securely should be a priority for any cryptocurrency holder.
While the process can seem daunting, understanding how security functions in the cryptocurrency ecosystem can prevent investors from having their assets stolen or irretrievably misplaced.
Further, understanding the relationship between private keys, public keys, and cryptocurrency storage can help consumers make an informed decision about which services or wallets they choose.
As we’ve learned from past cryptocurrency breaches, these decisions play a vital role in having a safe experience with cryptocurrency trading.
The difference between private keys & public keys
Two important terms in the cryptocurrency space are ‘public keys’ and ‘private keys.’ Both are extremely important concepts when it comes to understanding how your digital assets are stored, secured, and recorded to the blockchain.
To understand these key terms, let’s examine the quintessential example: Bitcoin.
Bitcoin is credited as being the world’s first cryptocurrency. Like many other cryptocurrencies, it makes use of both a public key and a private key in order to let users carry out transactions in a decentralized manner.
All transactions that have occurred on the Bitcoin network are publicly viewable in what’s referred to as a public ledger. This ledger is one of the hallmarks of blockchain technology and is designed to allow the public to scrutinize the network’s transactions. This effectively prevents falsified records and helps mitigate malicious behavior.
When you’re viewing a transaction on the Bitcoin network, you’re not seeing any information that is directly related to a person’s identity. Instead, you’re seeing what is known as a public key.
This is a string of alphanumeric characters that serves as the address the network uses to identify users. Additionally, this is the address that other traders can use to send digital assets to one another.
Generally, a public key is not considered as innately private information.
A private key, on the other hand, is a longer alphanumeric string that can be used to control your cryptocurrency holdings. Your private key is your way of identifying your assets as your own. Without it, many have lost access to their holdings.
A private key essentially serves as a digital signature. It is important to keep this information private, as anyone who knows your private key can gain complete access to your digital funds.
Scams, breaches, and threats to your cryptocurrency holdings
As a new industry that is attempting to do things that were unconceivable even a decade ago, the cryptocurrency space has faced many challenges. There have been significant breaches that have caused millions of dollars in loss for investors, as well as many barriers to entry regarding the technology’s usability.
The industry has grown a lot since the first Bitcoin transaction took place in 2009. At that time, the entire crypto experience was much less user-friendly and mainly catered to tech experts. This resulted in a lot of lost cryptocurrency holdings that are believed to be impossible to retrieve.
According to findings from Chainanalysis in 2017, up to four million bitcoins are lost forever. The cryptocurrency was designed with a fixed supply, meaning only a number just shy of 21 million BTC will ever exist. Lost holdings will likely never re-enter the economy.
Moreover, not all methods of storing cryptocurrencies are equally secure. A scam that took place in late 2017 saw $3.2 million USD worth of cryptocurrency stolen by malicious actors.
Reportedly, this scam involved the creation of a fraudulent crypto wallet that tricked users into providing their private keys. The website encouraged its victims to upload their private keys in order to “access their funds,” which were instead stolen.
Unfortunately, this is not an isolated incident in today’s marketplace. While there are many genuine actors in the landscape, there are also malicious parties looking to take advantage.
In order to stay safe, it’s important to keep your private key private to avoid potential theft. Further, it’s important for cryptocurrency holders to make sure that they do not misplace their private keys, or they will likely lose access to their funds.
Cryptanite helps users keep their cryptocurrency holdings safe
As a strong advocate for the development and betterment of the cryptocurrency industry, Cryptanite is a company that strives to do its part in making the landscape more secure.
Many of its services help users keep their private keys away from unwanted parties. Additionally, these offerings can prevent users from misplacing their crypto holdings.
The Cryptanite Wallet is a service for storing cryptocurrencies that was developed by experienced blockchain engineers. It provides a safe and efficient storage method and can even be used automatically when purchasing or exchanging assets using a Cryptanite service such as those available on the Cryptanite mobile app.
One of the key features of these services is the way in which they simplify the process for traders of all experience levels. Users can rest assured knowing their holdings are safe while not having to deal with any of the complex technical aspects that have led to misplaced cryptocurrency holdings in the past.