What Encryption Keys Are Used in a Bitcoin Wallet?

Cryptography requires a public and a private key to access any encrypted information. It is about encrypting certain information to keep it secret from third parties. It ensures that only an authorized party can decrypt the data.

The basic concept of a two-key system is that the public key is used to receive transactions, and the private key is needed to send them.

The use of two different keys (public and private) is called asymmetric cryptography, a basic aspect of blockchain. The two keys are mathematically related to each other.

The public key originates in the private key. This relationship allows users to create unique signatures that can only be verified by other members of the network who know the corresponding public key.

What Are Public and Private Keys?

There are two types of keys: public and private.

Public keys are comparable to account numbers. They can be freely given to everyone, and everyone can send transactions with them.

Private keys, on the other hand, must be kept secret, as their name implies. They are comparable to a kind of PIN or verification code that, together with the corresponding public key, allows access to the credit in the blockchain.

Note that keys are not stored in the blockchain. Instead, they can be stored in an (encrypted) file, which you can save anywhere and store offline.

Under no circumstances should you give your secret key to another person. It is best to store them securely (e.g., in a paper or hardware wallet).

What Is a Bitcoin Private Key?

A private key is designed to create the signatures required to use bitcoins and other cryptocurrencies because it allows you to prove ownership of the funds involved in a transaction.

With this in mind, it is important to keep them out of the reach of third parties in a secure and secret location. Disclosing them to others is tantamount to giving them control over the bitcoins.

A private key contains a combination of random words that provide direct access to your Bitcoins on the blockchain. Even if access to the hardware/software wallet is lost, you can import and recover funds from another new wallet.

In general, private keys are rarely processed by users but are encrypted and represented by an initial phrase or number. They usually consist of 12 or 24 words, which must be stored as gold.

Where to Store Private Keys?

Since losing or giving access to your private keys to a third party equates to a loss of funds, it is worth seriously thinking about storing your private keys.

Experienced crypto users recommend making a backup copy of your private key and writing it on a paper medium. For example, the Ledger hardware wallet has several pieces of paper.

Wallets

Using a wallet is the most common way to protect a private key. There are various types of wallets; they include:

• software wallets
• hardware wallets
• web wallets
• paper wallets

Web wallets are the most vulnerable. But they are popular because they can be easily accessed using the Internet.

A paper wallet is considered the safest way to store cryptocurrency. Using a unique platform, you can create private and public keys, print them out, and store them offline. Of course, there are some risks. For example, you can damage the wallet or lose it, but this way still seems to be the safest and cheapest among others.

Seed Phrase

This is a string of words containing the address that the wallet generates. This is an additional measure to protect funds.

The seed phrase program generates unique word combinations, which you should write down and hide in a safe place. Then, if your computer, laptop, or smartphone is damaged, you can recover all of your data using the seed phrase. These actions can go a long way toward securing crypto assets. In addition, most well-known wallets usually have a seed phrase built-in.

Conclusion

Private keys are essential to the security of a Bitcoin wallet and, therefore, should be kept in a safe place. If the user loses access to the private key, they will lose access to their cryptocurrencies. Therefore, the best storage method is paper. In addition, the key is not stored on a device connected to the Internet and is inaccessible to hackers.