Cryptocurrencies work in a different way than regular bank accounts. Many elements, including the private key, need to come together so the whole ecosystem can work seamlessly. However, this might be the first time you encounter these concepts.
In this article, we will introduce you to the importance of private keys and why it is important for you to store them properly.
What Is A Private Key?
Remember that your wallet actually doesn’t hold any currency. Everything stays on the blockchain instead, and you will need some form of proof to access it.
When creating a crypto holding, the issuer (such as a wallet application) will generate a pair of digital keys: a public key and a private key. You can think of this public key as your bank account number, while the private key is your ID or PIN code that can be used to verify your identity.
Most of the time, you don’t need to worry about these keys. They are long combinations of letters and numbers – a challenge to remember without proper tools. The wallet application or exchange will store and manage them on your behalf.
Whenever you initialize a transaction, the wallet will use the private key to create a digital signature. The blockchain needs this signature to verify your ownership and confirm the transaction.
Risks Of Losing The Private Key
The private key acts like the password to your crypto assets. There are some serious consequences of failing to manage it properly.
When someone manages to obtain your private key, they can easily access and drain your crypto. Since no personal information other than the private key is required to make such transactions, your assets can evaporate into thin air within minutes.
Even if no malicious actor gets their hands on the private key, losing it means you are no longer able to access your crypto. Without this key, you can’t sign off the signature to verify your ownership.
Cryptocurrencies are designed with no banks or institutions in mind. You can’t contact their customer support and ask for a new code, like when you forget your PIN. Every crypto owner has the sole responsibility of keeping it secure.
How To Store Your Private Key
There are many ways to store your private key and keep it safe. Most people choose to import it to an application or service. This makes selling or sending your crypto convenient like a real bank app.
These wallets are connected to the internet – the reason they are also known as “hot wallets”. You should pick reputable wallets with a strong track record to make sure your key is kept from curious eyes.
To increase the security of their assets, many crypto owners opt for offline storage. Common options include notebooks, hard drives, USB keys, and even just their memory. All these “cold storage” media don’t connect to the internet. It is a challenge to make transactions with them, but the risk of digital theft is also much lower.
How Locker Can Help You Store The Private Key
Whatever your preferred storage option, password managers like Locker can always make it more secure.
It has a dedicated vault for crypto backups out of the box. You can obtain the private key of your crypto and save it to your Locker account. Along with other items in your vault, the key will be encrypted and can only be viewed with your master password.
This approach is much safer than a piece of paper or a wallet application. They don’t have a backup of your digital keys. If you lose your notebook or phone, they (and associated assets) may disappear with it too.
Locker makes your key readily available any time you need it. Thanks to its cross-platform nature and syncing feature, your digital keys aren’t linked to just one device. It eliminates the single point of failure – one of the biggest risks associated with cryptocurrencies.
Download Locker and register an account for free to protect your private key.