Private Keys in Crypto: What They Are & How to Store Them
Imagine waking up one day to find that your profits from this year’s BTC price rally have been wiped clean. And not by some unforeseen price drop but by a hacker or someone with access to your private keys.
So, what’s a private key? This article examines private keys and advises on how to store them properly.
What Are Private Keys?
Simply put, your private key is like a password to your digital wallet. It’s an alphanumerical code that allows you to access your cryptocurrency and sign transactions. Your private key proves ownership of a digital asset, and you must always keep it secret. You can lose your cryptocurrency for good if it falls into the wrong hands or gets lost.
How to Store Private Keys
You can store your private keys in several ways, from hot wallets to cold storage. Each option provides varying levels of safety and accessibility.
Hardware Wallets
Hardware wallets are physical devices that store your private keys offline. This ensures your private keys are immune to online hacking attempts. Many hardware wallets do not display the key directly, and you need to connect the device to your computer to make a transaction.
While this may seem like a lot of work, it ensures your private key always remains in the hardware wallet. This protects it from prying eyes and ensures it stays secure even when transacting online. What if your hardware wallet falls into the wrong hands?
One way to protect yourself from such a scenario is to enable a PIN lock or a passphrase. This prevents the thief from accessing your funds. Additionally, hardware wallets have a seed phrase that allows you to recover a lost or damaged hardware wallet.
Paper Wallets
You can also store your private key using a paper wallet. This is simply a piece of paper on which your private key is written or printed. The key can be an alphanumeric or a QR code. You must type it manually or scan it with a QR code reader to access your funds.
Although paper wallets are safe from online threats, they are also easy to misplace or damage. On top of that, there are no safeguards if they fall into the wrong hands. Anyone with access to your paper wallet has access to your funds.
Software Wallets
Software wallets allow you to store your private key on your computer or smartphone. If you’re looking for convenience, then software wallets are ideal. They are easy and quick to access. However, they are vulnerable to hacking and other online threats. Popular software includes Exodus, Electrum, and Mycelium.
Cold Storage
Cold storage goes beyond hardware and paper wallets to include any method of storing private keys offline, away from the internet. These can be an encrypted USB drive, an offline computer, or a metal wallet. While cold wallets are safe from hacking, they are prone to damage, loss, or physical theft.
Best Practices for Storing Private Keys
Remember, if your private key is lost, so is your crypto asset. Below are some best practices you can use to ensure the security of your private keys:
- Backup Your Keys: Create multiple backups of your cold wallets and store them in different secure locations. This protects you against damage or loss.
- Enable 2FA: If you’re using a software wallet, enable Two-Factor Authentication to add an extra layer of security. This should be in addition to a strong password.
- Avoid Sharing: You should never share your private key with anyone and avoid any service that asks you for it.
These will significantly reduce the risk of crypto being stolen and give you peace of mind when transacting.
