Why is it important to know your private key?
You may have noticed across crypto-twitter throughout the past couple weeks of 2018, going into 2019, many users placed “[Jan/3🔑]” in their names to show support for a movement called “Proof of Keys.” Early Bitcoin promoter and investor Trace Mayer started the “Proof of Keys” movement hoping to inspire the community to truly take control of their Bitcoin on the Genesis Block day. January 3rd is Genesis Block day, or, a day where people celebrate the Genesis Block of Bitcoin which is the day that the first block was mined.
The idea behind the “Proof of Keys” movement would be that users would move their Bitcoin off of centralized exchanges, or third parties that may have extraneous control over the Bitcoin, to wallets that they had full control over. Through this, users would show their understanding of Bitcoin being decentralized by nature, where every user on the network has the power to control their own funds.
While the comradery of the “Proof of Keys” movement shows the strength of the Bitcoin community, hopefully, many of the participants already understood the importance of knowing your private keys and owning your own Bitcoin. The common expression is “If you don’t own your private key, you don’t own your Bitcoin.” This statement is true, as frequently, when you are holding Bitcoin or any cryptocurrency on centralized exchanges where you do not know your private key, this means you do not truly own your Bitcoin.
Breaking it down a little further, with Bitcoin there is a private, and public key. Both of these are important in different ways, but the private key is focused on securing the wallet. A private key is a secret string of numbers and letters that is used behind the scenes to send Bitcoin to another Bitcoin address. The private key is a 256-bit long number that is randomly generated when the wallet is created. In a medium article (linked below in sources) Michael Kerbleski calculated that the odds of guessing a private key are:
The reason that the private key is so drastically long and unique is the fact that it is cryptographically secured, ensuring uniqueness and randomness upon creation. The second layer of keys and Bitcoin would be the public address (or key). The public key is another string of numbers and letters used to publicly receive Bitcoin to an address. The public key is derived from the private key using cryptographic mathematical equations, ensuring uniqueness but some sort of uniformity between wallets. The public key is the address that is always seen/broadcast when receiving or sending Bitcoin. Users can create as many public addresses they want to receive Bitcoin.
Private keys are important for making Bitcoin transactions irreversible. When a transaction is sent or broadcast on the Bitcoin network, there are mathematical signatures that are linked to each transaction, using private keys, to ensure irreversibility between transactions, hence creating an immutable blockchain. Each transaction signature is unique despite the fact that it originates from the same private keys, making the transactions essentially impossible to copy.
While a lot of the information above is somewhat technical, the important part is that users should understand the importance of knowing your own private key, and safe storage of this backup key. While there are some mobile and desktop wallets that are not bad in terms of security, and usability, generally, the safest route to storing and controlling your cryptocurrency would be to use hardware wallets. While there are some new options popping up as cryptocurrency in its entirety gains more exposure, the main two hardware wallet options are a Trezor and Ledger.
I have personally used both a Trezor and Ledger hardware wallet and think both are viable and secure options that are available to the market as a safe way to store and truly own your cryptocurrency. I linked both of their websites in the sources section below, and there are multiple models available from each website. Both wallets have strong developer teams that frequently are adding support for new crypto assets. While the wide variety of devices and support for crypto assets is intriguing, the important thing to note here is that hardware wallets such as the Ledger and Trezor enable the user to gain full control of their digital currency.
An important note is to be sure and purchase hardware wallets from the official website, as some third parties have been reported to tamper with devices, potentially recording the keys before shipping to customers, resulting in customers funds disappearing. Easy solution to have no issues in this regard is to be sure to purchase from the official websites (linked below) or an officially licensed retailer.
Through using a device such as a hardware wallet, you are enabling full control of your assets. You own the physical hardware and should have the keys written down/backed up and stored in a safe place. Both Ledger and Trezor have intuitive desktop apps that allow you to send, receive, and as of late October 2018, on some models of the Ledger, exchange. In conclusion, while the “Proof of Keys” movement was somewhat mundane, it is always important to be in control of your Bitcoin by being in control of your private keys. The best way to do this is store your cryptocurrency on a piece of hardware, such as a Ledger or Trezor, and have your keys recorded and backed up.
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