Thinking to buy some Bitcoin & HODL it?
But let me tell you if your private keys of Bitcoin are not safe, you are sure to be doomed.
Let me be honest and admit that:
“Your bitcoins are only as safe as their private keys”
Even the most popular Bitcoin evangelist-Andreas M. Antonopoulos has said this several times:
“Your Keys, Your Bitcoin. Not Your Keys, Not Your Bitcoin”
But we still keep hearing about the private key hacks which shows that this critical thing of ‘Private Keys’ is still not well understood.
That’s why I am attempting to explain the concept of private keys related to Bitcoin again today and hoping that its awareness will help Bitcoiners adopt a more proactive approach in safeguarding their private keys.
So let’s begin:
Intro: Bitcoin (BTC) Private Keys
A private key of Bitcoin is just a secret alphanumeric number.
Anyone having this secret number is entitled to spend those bitcoins, and that’s why a private key of Bitcoin needs to be safeguarded very carefully.
Usually, this key resides in a Bitcoin wallet file and for those of you who aren’t familiar with a Bitcoin wallet, here is a simplistic explanation.
A Bitcoin wallet is merely a combination of a private key and a public key of bitcoins.
So if you have this combination on a piece of paper, it is called a paper wallet, or if they are present on a mobile device, it is called a mobile wallet.
To understand the concept of private keys in Bitcoin let me give you an example:
Imagine this is the 1950s:
You are Bob, who wants to send a letter to Alice. You both are friends.
Now to do this Bob needs to know Alice’s postal address or post box number. This post box number is public and is known to Alice and his friends & family, like Bob.
Moreover, Alice can always tell this post box number to anyone from whomever she wants to receive letters.
Now the real fun starts:
Let’s assume the letter has been posted in the post box but to actually receive the letter Alice needs to use her post box keys to unlock the box and take out her letters.
This key is personal to Alice, and she safeguards it cautiously because she knows that anyone in possession of this key can take her letters.
So, in this case, the post box number or address is actually the public key or public address in the Bitcoin realm and the letterbox key is like the private key of Bitcoin.
Watch this to understand more about Bitcoin key:
So, in short, a private key of Bitcoin is just a 256-bit number which can be denoted in several formats and is used to spend/send bitcoins from one address to another address.
But the most common type of private key format is this, and it usually starts from ‘5’:
Private key example: 5KVrxY3ZMQX8mWPXhLrZuvgKBMYLTiEgruhJZMbTGPEjdbQbFc7
There are many other types used for private keys and the same we are going to discuss in the next section because these formats are integral to understanding private keys of Bitcoin as a whole.
So stick with me…
Private Key Format Bitcoin
Here are some of the most popular private key formats of Bitcoin that are used in different types of wallets nowadays:
#1. Raw Private Key
A private key (in bitcoin, i.e. ECDSA SECP256K1) is a 32 byte number between 0x1 and 0xFFFF FFFF FFFF FFFF FFFF FFFF FFFF FFFE BAAE DCE6 AF48 A03B BFD2 5E8C D036 4140.
For example: 0C28FCA386C7A227600B2FE50B7CAE11EC86D3BF1FBE471BE89827E19D72AA1D
#2. Private Key WIF (WIF- Wallet Import Format)
This type of private key has 51 characters base58, starts with a ‘5’. It is also shorter and includes a checksum in case of typos. For example: 5KVrxY3ZMQX8mWPXhLrZuvgKBMYLTiEgruhJZMbTGPEjdbQbFc7
#3. Private Key WIF Compressed (WIFC- Wallet Import Format Compressed)
This type of private key has 52 characters base58, starts with a ‘K’ or ‘L.’ For example: L4ePW82Ho4p1HSiSV4dnGbvXEhfJtu1QwHatVou4vu9dAAAzzCBs
#4. Private Key Hexadecimal Format (HEX)
This private key format has 64 characters [0-9A-F] and looks like this: DD8E991C5E4F3E715C6753B4DAC6BA5C1BD50DFE8E6984A9C2CF9E6283563F39
#5. Private Key (B64)
This private key format has Base64 (44 characters) and looks like this: 3Y6ZHF5PPnFcZ1O02sa6XBvVDf6OaYSpws+eYoNWPzk=
This type of Bitcoin key format is used where space is very critical such as on QR code cards or on physical Bitcoin. Mini keys look like this: SzavMBLoXU6kDrqtUVmffv
What Is A Bitcoin Public Key (or Address)?
Bitcoin public key is another alphanumeric number associated with Bitcoin on which bitcoins are sent or received.
And the fun fact is, Bitcoin public keys (or address) are derived from private keys of Bitcoin only by applying mathematical operations over the private keys by using Elliptic Curve Cryptography (ECC)
Furthermore, these public keys can be transformed into Bitcoin public addresses, and each of the transformation from private key to the public key to public address is irreversible.
And this irreversibility by maths has been the foundation of Bitcoin-world’s first fully functional cryptocurrency.
This is how a transformed public key looks like and it usually starts from digit ‘1’ and recently due to segwit addresses you will find public addresses or keys starting from digit ‘3’ also.
Public key example: 1CuzgGMPNLuCd3AWpG53H2qnFaDANq1z5X
How Do Bitcoin Keys Work?
Bitcoin is essentially a messaging system based on public-key cryptography or better known as asymmetric cryptography that uses two systems of keys for super-efficient encryption and communication.
Bitcoin uses public keys (or address) and private keys to encrypt and decrypt data (transactions value-bitcoins).
The keys are simply large numbers that have been paired together but are not identical (asymmetric). One key in the pair can be shared with everyone; it is called the public key.
The other key in the pair is kept secret; it is called the private key. Either of the keys can be used to encrypt a message; the opposite key from the one used to encrypt the message is used for decryption. (Source-techtarget.com)
See this to understand it fully:
In Bitcoin, it is ensured that the sender is the real owner of the account from which he/she is sending and this happens through signatures that are verified by this asymmetric algorithm or function.
And this ‘signature’ is a number that proves that a signing operation took place by the right full owner of the key or bitcoins.
A signature is mathematically generated from the hash of a transaction message plus the private key and is an irreversible mathematical operation.
And further, anyone can feed the known public key and this signature in a special cryptographic function to determine that the signature was originally produced from the hash of the transaction message plus the private key, without needing to know the private key.
This ensures that the sender/signer is the real owner of bitcoins.
How Is A Bitcoin Private Key Generated?
Elliptic Curve Digital Signature Algorithm or ECDSA is the asymmetric cryptographic algorithm used by Bitcoin to generate public and private keys.
And this asymmetricity ensures that funds can be spent by the rightful owners only.
How To Keep Your Private Keys Safe?
By now it would have been clear that ‘Private Keys Of Bitcoin’ are the most important.
But if we speak strictly, there are no bitcoins at all, these are simply numeric entries on the ledger.
And holding the right private keys gives you the privilege to add or subtract these entries on a specific address of the Bitcoin ledger or transfer these numeric entries to another address within the Bitcoin’s blockchain.
That’s why safeguarding your private keys is of paramount importance.
This can be easily done by using a good Bitcoin wallet and by following necessary security practices. And that’s what we are going to discuss in this section.
So let’s start:
#1. Hardware Wallets
Hardware devices that stores your private and public keys are generally known as hardware wallets. And let me tell you some very good hardware wallets are available in the market. For example Ledger Nano X & Ledger Nano S.
#2. Mobile Wallets
A bitcoin wallet software on a mobile-based client is called mobile wallets, and these wallets are some-what secure in handling your private keys of bitcoins.
Don’t store a large sum of funds on Mobile wallets. Instead, use hardware wallets for storing large amounts of bitcoins.
#3. Desktop Wallets
Bitcoin wallet software clients installable on Windows, Mac, or Linux are called desktop wallets, and they are generally considered less secure than mobile wallets.
But if you use them with proper encryption and firewall settings, these wallets should be good to store a significant amount of bitcoins.
#4. Web Wallets
Web wallets are those wallets that exist purely on the internet and are accessible only through a browser are called web wallets.
Not recommended to store bitcoins here because you can easily be scammed by a phishing attack or a malware attack,
#5. Paper Wallets
Paper wallets are simply a piece of paper with bitcoin private and public keys printed on it.
If you know how to use paper Bitcoin wallet properly, you may go ahead storing your bitcoins here but if you don’t know, use hardware wallets for the safe side.
#6. Brain Wallets
First thing first…
A Brain wallet for storing bitcoins is a bad idea because the human brain is highly predictable and usually thinks of simple numbers/patterns to generate private keys.
And this nature can be highly predictable as well as lethal.
For example, see this public key:
This key is generated from digit ‘1’ as the brain wallet private key, and if you see it on the blockchain explorer, you will find that 1000s of transactions have happened on this address and a total of approx 7 BTC existed on this address.
So if you choose this address to store your bitcoins, it is 100% sure that your coins will be taken because digit ‘1’ as the private key is too predictable and already known.
What Is Private key Used For?
Private keys are used for unlocking your bitcoins locked on a Public address. Having a private key for a particular Public address on which unspent coins are present is like having a right of ownership and right to spend them.
This is a marvel of public-key cryptography, one of the main four ingredients which makes Bitcoin possible !!
Does Each Bitcoin Have A Private Key?
Yes & No both.
Each Bitcoin can be split upto 10^8 and the smallest unit being satoshi. So it would be correct to say for each satoshi unit or a collection of satoshis which are unspent on a Public address will have a corresponding private key.
What Is BTC Private Key Safeguarding Tips?
Some Actionable Security Practices To Safeguard Private Keys…
- Private key encryption is one smart way of safeguarding your keys if you are using a mobile or desktop wallet. But do remember that this encryption password needs to be hard to guess or brute force.
- Use the right firewall settings and use malware & antivirus protection softwares.
- Use passphrase and salt both in your private keys or seed. (this is a bit complex, but if you understand you can do that…)
- If you are using a paper Bitcoin wallet, keep your BTC paper wallet in fireproof, waterproof and ink proof environments to safeguard your private keys on it.
- Be aware of phishing attacks trying to fetch your private keys from your web or mobile wallet.
And if you do these things and use the recommended types of wallets, you will be OKAY.
So that’s all I wanted to share in this article. So now if you have any questions or suggestions regarding it then do express those in the comments section below.
And if you think this article was helpful to you or can help some of your friends be cautious then do share it with them 🙂
- Intro: Bitcoin (BTC) Private Keys