Private Key
In the context of cryptocurrency, a private key is a number that allows users to sign transactions and to generate receiving
addresses.
Cryptocurrencies rely heavily onÂ
public-key cryptography to protect usersâ funds. In fact, this is where their name comes from.
Public-key cryptography involves users generating a very big number (a private key) that would be practically impossible for anyone to guess. Typically, this number is represented as a long string of letters and numbers. Below is an example of aÂ
Bitcoin key:
L2hjTJNhjpUTdAVMArh3UqmnTXEVx6J6Faui8cUXCPpyQMUEkJ54
A user can create a public key by performing an operation with the private key. Typically, we do another operation on the public key to get a public address. This is what you hand out to other users when you want them to send funds to you.Â
Importantly, a private key also allows you toÂ
digitally sign data, such as a message that says I am paying X to address Y. Ultimately, thatâs all a transaction is â a signed statement on theÂ
blockchain that assigns coins to a new address.
If you sign a message (i.e., a transaction) using your private key, others can use your corresponding public key to verify its authenticity. They use your public key to check if the message was really signed by you, and to ensure it wasn't altered after that.Â
Note that itâs necessary (and perfectly safe) to share your public key with others. But you should never reveal your private key. If someone gets access to it, theyâll be able to spend your funds by signing transactions on your behalf.Â
Nowadays, users are rarely exposed to private keys like the Bitcoin one seen above. Most cryptocurrencyÂ
wallets today supportÂ
seed phrases, which are human-readable backups that can recover a virtually limitless amount of private keys.
Keeping your private keys secret is of paramount importance. There are different ways you can shield them from prying eyes, though many would agree thatÂ
hardware wallets are the most secure option. As for day-to-day use, software wallets are perhaps a more convenient alternative.Â