Cryptocurrency private keys: Keep them safe

Private keys, are very important for cryptocurrency users. All cryptocurrency wallets read the blockchain to find the balance, so there is no way to copy cryptocurrency, because the balance is a calculation result, of the blockchain data.

Proof of ownership

When somebody decides to use a cryptocurrency wallet, some questions come up like: What will happen, if my device is broken or stolen? How does the new software on a new device will find out my cryptocurrency on the blockchain? How can I prove that I own those coins, as there is no one to give personal data?

All theses questions can be answered easily, when we understand how cryptocurrency addresses work. On the blockchain, there are no personal data, only addresses. Again cryptography gives the solution. For each address a corresponding private key is generated. Without this private key, the address owner, cannot use the coins, stored in the address. When the wallet creates an address to receive cryptocurrency, it creates also the corresponding private key. They private key is the proof of ownership of a specified address.

Keep them safe

Each wallet has access to the private keys of the addresses that it contains. Without them, the user cannot send the coins anywhere, so it is like, that he has no coins. What is the use of coins, when I cannot spend them? The wallet developers use different ways to store the private keys, so the user has to know, how to backup this important data. If a hacker gets access to the private keys, then the address will be transferred to his wallet, by importing the private keys, and the coins are stolen.

Paper wallets

The simplest form of a wallet, is the paper wallet. A paper wallet, contains an address and it's corresponding private key. You can send coins to that address, and you can keep the paper in a safe place. When you want to spend the coins. You import the private key to a wallet software. Then this address belongs to the wallet, and the coins can be spent. A visit to bitaddress.org will help us understand how a paper wallet is created, and we will see the key pair generated.

Wallet control

Many cryptocurrency exchanges provide wallets for their users, to let them do transactions, Those wallets, usually do not provide the private keys to the user. This is a risk, because if the exchange is hacked, the coins cannot be recovered, because the user does not have the private keys. The user does not control his wallet. When the private keys are provided to the user, then the user controls the wallet, because the private keys allow him to import his coins to any wallet he wishes, if something goes wrong.

Keep them like cash

Wallet private keys, should be kept as cash. When cash is stolen, it's gone. The same, for private keys. If lost, the coins contained in those addresses are gone. It is very important for a cryptocurrency user to know this. It is the only way to keep his coins safe.

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