At the core of cryptocurrencies is the idea of self-sovereignty – the notion that users can act as their own bank. Secure your funds properly, and they'll be harder to reach than even the most well-guarded of bank vaults. Fail to do so, and you run the risk of someone remotely emptying your digital wallet.
Learning how to properly secure your digital coins is a vital step as you journey down the cryptocurrency rabbit hole. In this guide, we'll discuss some of the techniques for doing so.
What is a private key?
A private key, like a real key, unlocks your cryptocurrency for you to spend. It's just a really big number – so large that it would be impossible for anyone to guess. If you flip a coin 256 times and write down "1" for heads, "0" for tails, you'll end up with a private key. Here's one we've just generated. It's encoded in hexadecimal (using numbers 0-9 and characters a-f) for a more compact representation:
If you look that number up on Google, you'll see the only occurrence is in this article (unless it's been subsequently copied elsewhere). That should give you an idea of how truly random the number is – the odds of anyone having ever seen it before are astronomically low.
That example still doesn't do it justice. The number of possible private keys is close to the number of atoms in the known universe. In a nutshell, this is a vital security principle in cryptocurrencies like Bitcoin and Ethereum. Your coins are safe because they're hidden in a brain-meltingly large range.
If you've received funds before, you'll be familiar with public addresses, which are also strings of random-looking numbers. Those are obtained by doing some cryptographic magic on your private key to get a public key, which is hashed to get the public address...