A crypto key is an integral part of what gives Bitcoin and other cryptocurrencies their security and privacy. Read on to understand how they work, the different types and why they are useful.
- Introduction To Crypto Keys
- The Origins Of Crypto Keys
- Why Are Crypto Keys Important?
- Where Are Crypto Keys Stored?
- Summary
Introduction To Crypto Keys
When you buy cryptocurrency you are issued two keys, one public and one private. These keys allow you and everyone else on the blockchain to transfer and store crypto assets securely. Crypto keys come in two forms, public keys and private keys.
Crypto keys are lines of code consisting of numbers and letters that allow you to transfer and access your online crypto assets.
Public Keys
When you buy a cryptocurrency for the first time through an exchange you will be issued a public and a private key. Your public key acts as a gateway to send and receive funds from other individuals in the blockchain.
This key is safely shared with others, allowing smooth and encrypted access to the blockchain and facilitating transactions.
Source: cheapsslsecurity.com
Private Keys
Your private key is extremely important, this key will allow you to access your crypto wallet and the funds inside it. Think of this key as your password to access your cryptocurrency holdings.
As long as you hold that key, you can access your funds at any point and in any place (providing you have an internet connection).
To summarise - your public key allows you to receive cryptocurrency and your private key allows you to access it, they are paired together and unique to you, they cannot be edited or transferred to a different account. This means both keys (especially your private key) must be kept safe at all times!
The Origins Of Crypto Keys
The science of crypto keys is fascinating and remarkably simple!
Crypto keys are created using cryptography, they use a string of characters used within an encryption algorithm for altering data so that it appears random.
Similar to how a physical key works, this data jumbling locks, or encrypts, your data so that only the person with the right key (the string of characters) can unlock, or decrypt it.
Before computers, cryptography was the act of simply turning one letter into another to create cypher text, more information can be read here.
However, computers are much quicker than a human brain. They can complete more complex calculations which meant cypher text became obsolete.
Fun Fact: Alan Turing (the creator of the first computer) used his invention to help decrypt the Nazi cypher text in WW2 and contributed massively to the Allies winning the war.
How Does This Relate To Crypto Keys?
Now we use computers to generate what is called SSL keys, these are the public and private keys that we spoke about earlier. These are far more complex than the early cypher text.
Computers can generate algorithms, that are far more complex than the original cypher text. These algorithms are randomised to the maximum capability of the computer. Although it is impossible to randomise 100%.
Combined with the encryption algorithms, a cryptographic key (your public and private keys) will scramble a text beyond human recognition to make it the safest it possibly can be from decryption.
Why Are Crypto Keys Important?
The blockchain and all the assets that use it are decentralised. This means that there is no central authority, such as a bank, that controls your digital money. Your crypto assets are, instead, spread over a wide network of connected computers via the blockchain.
Being decentralised means that all blockchain transactions are accessible to the public, all keys are also available to view. That’s why encryption is important when it comes to crypto transactions. Crypto keys keep your money safe and secure by encrypting your keys.
Crypto keys are the backbone of any cryptocurrency transaction. Public keys allow you to receive and send crypto assets and your private key enables you to prove your identity and access your funds.
On the blockchain, anyone can verify that you are the owner of the amount of cryptocurrency that you own by using your crypto keys as proof. Preventing fraud and theft.
Where Are Crypto Keys Stored?
There are two ways that you can store your crypto keys, in a crypto wallet or offline.
Offline storage:
Some crypto investors will store their keys offline. This means that it is impossible for hackers and data miners to retrieve their keys from the internet. They will use devices that are not connected to the internet, they will write the keys down on pieces of paper o they will memorise them.
Whilst all these ways are effective at stopping people online from retrieving your data, it makes crypto transactions a lot harder, plus, you expose yourself you other risks when storing them offline.
These include…
- Losing the device or piece of paper the keys are stored on.
- Devices getting stolen, the data is irretrievable as it is not stored on the internet.
- Forgetting the key (if it is memorised)
Online Storage:
The most popular way to store crypto keys is the use of what’s called a crypto wallet. This is by far the most convenient and ideal place to store all your encrypted information. Through the use of these ‘hot wallets’ (another name for crypto wallets) your private keys are stored on the internet.
Already having your wallets on the internet makes buying, selling, or using your digital money as convenient and accessible as using your regular credit or debit card online.
Where Should I Store My Crypto Keys?
It is essential that you choose a wallet provided by a company with a long track record for security and features like two-factor authentication. Some of the most popular and secure wallet providers are…
- Coinbase Wallet
- Electrum
- Mycelium
- Ledger Nano X
- Exodus
- Crypto.com
Summary
Crypto keys are the backbone of the cryptocurrency market. They are the devices by which transactions can be made safely and securely.
The main driver behind people participating in this new digital currency and blockchain wave is the security and lack of an overarching governance mechanism. Crypto keys are what keep your transactions untraceable and what keep your crypto asset from being stolen.
