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FollowingWhen you first buy cryptocurrency, you are assigned two keys: a public key, which works similar to an email address (meaning you can securely share with others, allowing you to send or receive funds), and a private key, which is usually a string of letters and numbers (not to be shared with anyone). You can use the private key as a password to unlock the virtual vault where your funds are stored. Only you can access the private key, and your funds are safe and can be managed from anywhere in the world via an Internet connection.
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Why is private key important?
The public and private key system is one of the encryption technology innovations to achieve secure digital currency. Its working principle is as follows.
1. Cryptocurrencies such as Bitcoin and Ethereum are decentralized, so there is no bank or any other institution in between holding your digital currency. Instead, your cryptocurrency is distributed across a computer network through a technology called blockchain. Openness is one of the characteristics of cryptographic blockchain: Anyone can see all public keys and transaction information.
2. Through some complex mathematical operations, your public key is actually generated from your private key, which makes them a matching pair. When you use a public key for a transaction, you verify that it is indeed you by using the private key.
3. Even if everything is made public, it is still anonymous, and no name, address or any other information is required to be provided when using cryptocurrency.
4. Take Bitcoin as an example. Anyone who is interested can see the buying, selling or use of Bitcoin, but only people with a private key can conduct these transactions.
Where should I store private keys?
Like any password, protecting the security of the private key is crucial. There are two main ways to track private keys:
1. Store private keys online in cryptocurrency wallets: For most people, the best and easiest option is to use a virtual wallet (such as the one provided by Coinbase) to manage private keys. These are called \"hot\" wallets because private keys are stored on the Internet. This makes purchasing, selling or using digital currency as convenient and easy as using a credit card online. Choose a wallet provided by a company with features such as long-term security records and two-factor authentication.
2. Store private keys offline in a secure location: Some investors choose to keep private keys on computers that are not connected to the Internet, write them on paper, or even just write them down in their heads. This method is called \"cold storage\" and although it does protect private keys from digital theft, it can make cryptocurrency very inconvenient and create other risks.
