đź’ˇ TL, DR:
- Private key is used to decrypt data received from the public key.
- Private key is secret and cannot be shared with others.
- Storing private keys is the top important matter to consider for crypto users.
- Private key is randomly generated and will expire.
Intro
Along with the public key, the private key is one of the top essential tools in the crypto economy. People have to use private keys along with public keys to be able to implement transactions successfully.
In this article, let’s learn about private keys, from the basics to real-world applications, to understand how to use them effectively.
An Overview of Private Key
What is a private key?
First, we need to understand what a private key is.
In short, a private key is the secret string of values used to decrypt messages between senders and recipients. The private key operates based on the symmetric encryption technique in which encrypted data can be decoded.
Typically, every crypto user will have a public key and a private key. While the public key is sharable to others and used for encrypting data, the private key is the tool to “translate” data and is unshareable.
What is the purpose of private keys?
As mentioned above, private key is a secret, customized string of values that cannot be translated and read under our naked eyes. Only by having key decrypting programs that one can understand the message. That being said, the private key – along with the public key – is used in the process of text encryption and decryption, making communication between parties more secure.
How private key works
Private key is usually used with a public key as a pair to encrypt and decrypt data. In that case, the private key works as follows:
- Generate the public-private key pair: A pair of public key and private key will be randomly generated by encryption application software.
- Store private keys in wallets: Users can choose among hardware, software, online or paper wallets according to their personal demands.
- Exchange keys: The public key of the pair will be exchanged between cooperating parties to proceed transactions
- Use the private key: The private key’s owner uses their private key for decrypting the data encrypted in the public key.
However, in some cases, private keys can be used in symmetric encryption cases where people can use the same private keys for data encryption and decryption. In that situation, the process is quite different from the standard:
- Create a new private key to be paired with the present private key.
- Store the private keys pair by using special passwords or applications.
- Share keys between senders and recipients.
- Use that private keys pair to decrypt data as demanded.
Normally, private keys should not be shared. However, in this situation, the private keys are now used to encrypt and decrypt data between two parties, so exchanging one private key of the pair to cooperators is a must.
Private key’s application in digital wallets
Private keys are auto-generated, available to one user only, and used to decrypt data. And that is why this symmetric encryption method is applied in most digital wallets nowadays.
Typically, when one person opens a digital wallet, the application automatically creates the private key and stores it safely in the system. When a transaction happens, the software will activate the private key to create a unique digital signature for that person’s account. Only when the signature is created and verified that the transaction is processed.
The process won’t continue if the signature is invalid or unmatched. Therefore, the private key encryption process keeps all digital transactions more secure.
Private key: Pros and Cons
Pros
The private key has several great advantages due to its symmetric encryption technique, including:
- Security
Private keys are auto-generated and can be accessible only to the owner, so it can protect one’s data privacy. Besides, private keys are long and unreadable without advanced devices, so it is hard to hack.
- Convenience
Symmetric key encryption takes less time to proceed than the asymmetric encryption method, making the private key decoding procedure faster than the public key.
Cons
However, the private key still poses some problems that you must know before using it for doing crypto transactions, for example:
- Effort involved in management
Having one’s private key, attackers can read all your crypto data without any difficulties. Thus, each user must learn how to store and manage the private key to avoid becoming a victim of data theft.
- Regular changes needed
To avoid leaking personal data and minimize the chances of unauthorized data access, users are suggested to change or update the private key regularly.
- Impossible data recovery
If a private key is inaccessible, all data encrypted by that key is unrecovered.
How to store private keys?
Hardware wallets
Recently, hardware wallets have been commonly preferred in the crypto community because they allow offline data storing. Users can take the wallets everywhere with them; most importantly, there is no need for the Internet or personal computer to access the wallet. How convenient!
Compared to software wallets, hardware wallets have a lower risk of getting hacked. Hackers usually attack one’s data by cyber hacking their own personal computer (PC), then getting full control. With the hardware database separate from the PC, no more worry about hacking!
Easy to carry around, offline access, low hacked risks – those are the reasons why hardware wallet is the top choice to store private keys!
Software wallets
The second storage option is software wallets. In short, they are applications designed to store, manage and secure cryptocurrencies. For most software wallets, there are both mobile and PC versions.
In particular, there are three types of software wallets:
- Desktop wallets: users need to download the program to their personal computer and keep the crypto data there.
- Mobile wallets: their mechanism is similar to desktop wallets, but the only difference is: it is optimized for the best experience on mobile phones.
- Web-based wallets: users can access the wallets through a web browser or browser extension.
Compared to hardware wallets, software ones are considered less secure since at least one electronic device is involved. That could be the user’s personal computer, tablet, or mobile phone, which is highly likely to get hacked.
However, they are cheaper and easier to use than hardware ones, so choose the one that fits your condition most!
Online wallets
As its name suggests, online wallets are online services that allow you to keep your crypto data and assets on a third-party-controlled database that can be accessed through the Internet.
In other words, some providers have a store online; you want a slot in their data “warehouse,” you sign in, have an account, and keep your crypto data there.
The process is quite simple, the price is low (or free!), and you can access the data warehouse from everywhere as long as there is an Internet connection – that is why an online wallet is such a great choice!
However, please keep in mind that: first, if it is so easy for you to access your data from everywhere, then it is simple for hackers to do it too. They can easily hack your account to get your information.
Second, you are not actually keeping your crypto assets; you hire another party to keep them. The control is 100% on them, not you!
Paper wallets
We have mentioned a lot of high-tech storage technologies already; now, let’s return to the traditional and most basic way: paper wallet.
What is a paper wallet? In short, paper wallet is a piece of paper with your data written or printed on it. You can write the string value of the private key by yourself (but we don’t recommend it!) or print it from the software.
As described, there will be no electronic device or Internet involved, so the chances of being cyber-jacked are nearly 0%. There are only two small problems with this method: you must keep the paper carefully, and once you enter the key, it is a must to type it manually.
Private key vs. Public key – What are the differences?
Nowadays, public key and private key are commonly used together in crypto data transactions.
For new users that don’t know how to distinguish them easily, then here it is:
- Purpose
Public key is the tool to lock data from unauthorized users, while private key is used to unlock authorized ones.
- Shareability
Public keys is publicly available, while private keys are accessible only to their owner.
- Applications
Public key is applied in creating digital signatures, Transport Layer Security, and Secure Socket Layer connections and encryption. Private key is mostly used in digital wallets.
Final thoughts
That is all you should know about private keys. In general, it is a tool for decrypting crypto data to proceed with the data from senders. Every user will have one auto-generated key that will only be available to themselves and cannot be shared.
