What Is A Bitcoin Private Key?Last Updated on January 9, 2023 by Kevin Groves
Bitcoin trading is quickly becoming a favourite investment among Australians, and it’s not hard to see why. This crypto is very stable, and despite its volatile price swings, it’s easy to make a killer profit.
If you’ve bought Bitcoin before on cryptocurrency exchange platforms, you’ve definitely come across 2 types of keys; a private key and a public key.
What is a bitcoin private key? Why is it important? What would happen if you lost it? Here’s a simple guide into bitcoin private keys.
What Is a Bitcoin Private Key?
A bitcoin private key is an integral part of crypto trading as it secures your BTC and prevents unauthorized parties from accessing your funds. It uses the fundamentals of complex cryptography and is usually a string of numbers and letters that act as a password to your bitcoin investment.
When you start buying bitcoin, you are given 2 things; a private key and a public address.
Think of the address as your bitcoin bank account; it allows you to send and receive BTC. You, however, can’t make withdrawals without your password, which in this case is the bitcoin private key.
This private key is generated randomly and is a combination of alphanumeric symbols that are very difficult to crack. The only way someone would access your bitcoin is if you shared this key with them.
What’s the Difference Between Bitcoin Private Keys and Public Keys?
Private and public keys are a vital part of the Bitcoin framework, but they are different. The public key is more of an address to your bitcoin account. You can share this key with other people so that they can send you bitcoin.
A private key, on the other hand, is the code that you use to access your bitcoin address. It should be kept secret as anyone who has it has full access to your bitcoin investment.
The bitcoin private key comes in various forms such as mnemonic phrases, QR codes, 64 digit hexadecimal code or 256 characters long binary code. Most people prefer to store their private keys in an imported wallet format which is usually 51 alphanumeric characters.
Irrespective of the form you decided to store your private key in, there’s always one constant; the key is always a very large number.
You can easily create a public key from your private key, but the astronomically large size of private keys makes it difficult to reverse the process and create one from your public address.
What’s the Importance of a Bitcoin Private Key?
The main benefit of a bitcoin private key is that it keeps your coins safe from theft. Cryptocurrency is based on a decentralized structure which means that it can’t be stored by any financial institutions. Your coins are instead distributed across various networks using blockchain technology.
This ensures that all transactions and public keys are available for all traders to make it easy to verify transactions.
Even though everyone has access to this information, all your information is anonymous, and you’re the only one that can authorize these transactions using your private key.
The private keys are also proof that you own the bitcoin in your wallet. Without it, you cannot make any transactions, and you’ll lose access to all your coins.
What Happens if You Lose Your Bitcoin Private Key?
If you don’t have your private keys, then you don’t own any bitcoin. This is also why you should never share your bitcoin private key with anyone.
Sharing this key is equivalent to giving other people full control over your bitcoin investment, and they can easily make irreversible transactions.
Make sure your private key is safely stored and backed up because once you lose it, you can’t recover it. This also means that you lose your BTC too.
Where Should You Store Your Bitcoin Private Keys?
Private keys are integral in the ownership of Bitcoin and should be kept safe at all times. There are 2 fundamental rules for keeping your private key safe:
1. Store It in a Wallet
There are 2 main types of cryptocurrency wallets; hardware wallets and online wallets.
- Online wallets store your private key on the internet and are more accessible. Most of the time, traders rely on centralized exchanges like Swyftx to store bitcoin for them. This is especially recommended if you engage in frequent small trades. These types of wallets are highly susceptible to hack attacks, so conduct due diligence to ensure your preferred online wallet has solid security features.
- Hardware wallets are physical devices that store your encryption key. They are usually offline and are accessible without an internet connection which is why they are highly secure from malware attacks. You should, however, store them safely as you can easily lose them.
Other types of wallets that you should consider include;
– Paper wallets: this is basically writing your private key on a piece of paper. Paper wallets are generated offline, but they are also susceptible to wear & tear and can get lost.
– Desktop wallet: you install the wallet on your desktop and can withdraw the key as an importable file. Most desktop wallets are usually password protected.
Offline wallets, also referred to as cold storage, often make crypto trading a bit inconvenient, but they’re also highly secure. This is why there are recommended for HODLers with huge BTC investments.
2. Don’t Share It With Anyone
Your bitcoin private key is like your ATM pin; it gives you full access to your bitcoins, and anyone that has it also has control over your investment.
If you’re worried that you’ll forget it, use hardware wallets and store them in a safe place.
Protect Your Bitcoin Investment Today!
Private keys are an essential part of bitcoin trading. They prove that you own the coins and allow you to access your investment.
Due to the digital nature of cryptocurrencies, they’re a hot target for cybercriminals, and you need to be resilient when it comes to protecting your bitcoins.
This is why you should never share your private key with anyone else. You should also store your bitcoin private keys safely, either in a hot wallet or a hardware wallet.
Warren is the co-founder of CoinCryption. He has a passion for cryptocurrency and has been involved in this space for more than 7 years. His other love is digital marketing and has over 15 years of experience.