Why are private keys so important?

One of the cornerstones of the Bitcoin network and the crypto movement is decentralization. This means: There is no central institution, person or other entity that controls the network. We are dealing with a peer-to-peer network here, so all participants connect directly with each other.

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Public key and private key in the Bitcoin network

If I want to send Bitcoin or Satoshis to a friend, I only need their Bitcoin address, also known as a public key. This is something like the IBAN in the banking system, only without a bank. The public keys can be shared with others without the risk of jeopardizing access to the Bitcoin.

The situation is different with private keys. The name suggests it – they should be kept private. Because with them you can access your Bitcoin at any time and from anywhere in the world. Even if your computer blows up or all the ATMs in the world fail at once: If you have access to the Internet and your private keys in hand, you can freely use your Bitcoin.

On the other hand, however, if you lose them, forget them or fall into the wrong hands, you risk total loss. Because there is no “Forgot your password?” button in the Bitcoin network. After all, there is no central authority to turn to.

Private keys belong in a wallet

At least now you can guess it – private keys should be kept safe. To do this, you use digital wallets, the so-called wallets. A distinction is made here between hot wallets and cold wallets. With the former, you have quick access to your keys or coins because they are connected to the Internet. However, they are considered less safe.

In return, the safest option is cold wallets. Here you store your private keys on a type of USB stick, which are protected from unauthorized access by multi-level security procedures.

This claim: This article was published on May 20, 2023.

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