Oct 10, 2023
Before investing in crypto, you must know how to secure your assets. Otherwise, you could become one of the many people who have lost access to millions of dollars worth of cryptocurrency.
You can’t just keep your virtual information anywhere. You must choose a secure digital location as well as protect it with a private key.
So, what is a private key?
In this article, we’ll tell you everything you need to know about this type of asymmetric cryptography for securing your virtual assets and how to keep your secret key away from prying hands. Let’s dive in!
What Is a Private Key?
A private key is an essential strong encryption algorithm. This secret key keeps all your data and information safe through a unique string of letters and numbers.
Only authorized parties can then use this unique combination to decrypt and encrypt data. Simply put, a private key is basically like a password for a virtual vault. However, the generated secret keys are a long alphanumeric chain that’s impossible for anyone to guess.
A perfect example of a secret key would be the following:
To use a secret key, you also need to have a public key. That’s because both are a part of asymmetric encryption, which pairs the private key with a corresponding public address.
When you sign a crypto exchange, you use your public key. The receiver gets the public key, so they can verify it’s you.
To explain, think of a private key as your password, while the public key is your verifiable digital signature.
Accordingly, not only is it perfectly safe to send your public address to others, but it’s also a necessary part of all cryptocurrency transactions.
That said, most users nowadays don’t need to use secret keys. Instead, private keys are denoted as 12- to 24-word seed phrases, much like passwords.
On the other hand, if you choose to use your private key as is, you need to find different ways to store it safely. Otherwise, anyone who gets their hands on your private key can spend your money by making anonymous crypto transactions.
Importance of Private Keys
If you have any virtual assets, such as Bitcoin or Ethereum, it’s all up to you to keep them safe. Your private key is an essential part of the security of your digital assets. As mentioned earlier, your public key is visible to others and is used as an address for sending assets or for interacting with the blockchain. But only you, with your associated private key, can access the assets stored within your public address.
The public-private key pair allows you to make anonymous crypto exchanges. So, while everything is out in the open, you don’t need to use your real name or address. But if someone else gets ahold of your private keys, they get access to your assets. This is why it is crucial to handle your private keys securely.
How to Secure Your Private Keys
Naturally, you don’t want to have your private key readily available in multiple locations, as some locations wouldn’t be as secure as others.
That’s why many people prefer to store their indispensable private keys in a single digital wallet, such as the following:
Cold Storage: Accessible offline.
Hot Wallet: Accessible online.
Hardware Wallet: Accessible offline through a physical device.
However, storing your private key in one place is also unsafe. If, for any reason, you can’t access your secret key, then it’s lost forever. This is called single-point compromise.
Well, combining both approaches would be the most logical way to safely store your private keys. Luckily, there’s a way to do this through Multi-Party Computing (MPC).
MPCs are crypto wallets that use a specific cryptographic protocol allowing multiple parties to compute without revealing the data to each other, or needing a third party.
Why You Should Invest in Multi-Party Computing For Private Key Security
In the case of private keys, MPC can split the long alphanumerical code into many parts, known as shares. Then, the shares are distributed to the responsible parties, which can be one or more people.
All parties can then compute their part of the private key without sharing its information with other parties, thus creating a virtual signature, or a public key.
This way, there isn’t an instance where all parts of the secret key coexist. If one share of the MPC is compromised through digital theft, the attacker will have access to one of the numerous shares of the MPC, solving the single-point failure.
Additionally, MPC eliminates the need for hardware and cold wallets. In contrast, you’ll have your private key readily available, so you can make quick transactions at any time from anywhere, as a key holder.
MPC has its limitations, though. For instance, if you were to generate your own secure MPC, you’d have to pay a fortune. Additionally, the operating time would be too slow and unreliable.
What is a private key?
A private key is like a password for your cryptocurrency. It’s typically a public-private key pair that translates into a virtual signature. This way, you can send and receive funds anonymously from anyone, but only you have total control over your financial decisions.
The main problem with private keys is that they’re impossible to memorize. So, you need to keep them somewhere safe. If a hacker compromises this location, you can wave goodbye to your assets.
Multi-Party Computing is the best way to shield your secret key. It splits the key into numerous parts that never coexist. However, attaching the shares back together to reform a private key is a quick, hassle-free process.