If you have been involved in the cryptocurrency space then you have probably heard of both private keys and public keys. Although a simple concept, they are an essential piece for both the security and the functionality of your cryptocurrencies.
But don’t worry. In this article, I will be explaining what they are and much more. So without further ado, let’s jump right in.
A public key is used to receive cryptocurrencies, whereas a private key is used to verify transactions while also granting access to your cryptocurrency funds.
What is a public key?
In essence, a public key allows you to receive transactions. Derived from it is a shortened alphanumeric wallet address. As the name suggests it is completely public and visible on the blockchain.
Consequently, anyone can send money to this address however only the owner of the private key has control of the assets.
What is a private key?
In contrast, private keys are solely held by the public key owner. Simply put, they are used to sign transactions which in turn provides full control of the assets.
This includes the sending of cryptocurrencies from the wallet and the interaction with decentralized applications i.e staking, lending, etc. It is important to note that as the private key grants full control it should be kept secret.
Where are my private keys stored?
Private keys are stored in a software wallet or hardware wallet. Software wallets store the keys on an encrypted server, whereas hardware wallets store them on a physical device.
Additionally, if you use third-party services such as cryptocurrency exchanges then they have custody over the private keys.
What happens if I lose my private key?
Unfortunately, private keys cannot be recovered when lost. That being said, if you have a corresponding seed phrase then you can still use this to access your cryptocurrency address.
5 ways to safely store private keys
- Do not store private keys on a device that is connected to the internet.
- Always store them in a hardware wallet. The one that I recommend is the Ledger Nano X. You can check out my review here.
- Never share your private keys.
- Keep your private key stored in a safe and secure environment.
- Do not use third-party wallet providers. Not your keys, not your crypto.
What are seed phrases?
Seeds phrases function similarly to private keys. However, instead of a hex key, they are composed of a string of words that are randomly generated. This creates a key that is more intuitive for humans. Overall, they are between 12-24 words long.
Moreover, in most cases, they are issued by a third-party wallet provider such as a Ledger. Like private keys, they grant full control of users’ assets.
Not to mention, the string provides access to the whole wallet that can contain multiple private and public keys.
Where are my public keys stored?
Public keys are not stored on the blockchain. Instead, a file is encrypted that can be stored virtually anywhere. This is usually a hardware device or a third-party hot wallet.
Do all cryptocurrencies have private and public keys?
All of the major cryptocurrencies use cryptography to secure their tokens and assets.
Do NFTs have public keys?
All NFTs are assigned a corresponding public key. In other words, each NFT is minted to a specific wallet. Like other cryptocurrencies, NFTs can be transferred to other public keys and wallets provided the owner verifies the transaction.
Do NFTs have private keys?
All NFTs are assigned a corresponding private key. This grants full control.
As you can see, both of these terms are key to understanding the basics of cryptocurrencies. On one hand, public keys are used to receive transactions and are openly verifiable. On the other hand, private keys verify transactions and are kept secret.
Therefore, it is vital to secure them. However, if you follow the tips mentioned in this article it will help you navigate the space with ease. I hope you found this article useful and thanks for reading it.
Want to learn how to minimize crypto trading fees? Click here to read my previous article.