What is a Crypto Private Key
- Last Updated: November 19, 2023
A crypto private key is an alphanumeric string of characters used to sign blockchain transactions digitally.
A blockchain transaction can be a transfer of value from one blockchain address to another blockchain address.
Or, also a blockchain transaction can be to sign a Smart contract or give wallet access rights to a dApp (a dApp is a decentralized Application)
Examples of transactions are:
– Leo sends 0.01 BTC to Lana: This is an example of a transfer of value in which Leo spends 0.01 BTC (plus transaction fees), and Lana has an additional 0.01 BTC available to spend.
– Leo sends 0.5 BTC from one of his hot wallets to one of his hardware wallets: This is also an example of a transfer of value, even if the transfer is between wallets that belong to the same person, Leo.
– Bob signs a smart contract that allows a website to view and manage the NFTs stored in his Metamask wallet.
Understanding what a private key is and its role within a cryptocurrency wallet is crucial.
Because the safety of your wallet and digital assets like cryptocurrencies and NFTs are linked to how much you understand and how safe you can keep your private keys.
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Why is the Crypto Private Key so Important
Crypto assets like cryptocurrencies or tokens are not stored in your cryptocurrency wallet but in a Blockchain. And that can be the Bitcoin blockchain, the Ethereum blockchain, or the Cardano blockchain,…
And whoever owns the private key has authority over the assets that are stored in the Blockchain and that the private key unlocks.
Because the blockchains do not know about people but about private keys. For a Blockchain, whoever owns the private key, owns the assets.
And this is why the private key is so important:
– If you lose your private key, you lose transactional authority over the assets that only that private key can unlock. The assets will not disappear if you lost your wallet and your private key, but the assets will still be visible in the blockchain but you will not be able to transfer them, swap them or sell them.
– If your private key falls into the hands of a malicious person by a hack or scam, that person has also gained authority to the assets that the private key unlocks. And that person most certainly will transfer them to another wallet, effectively taking the assets away from you.
Additionally, NFTs or Web3 are becoming increasingly popular, and more often than not, they require us to digitally sign smart contracts to interact with Web3 platforms.
The private key is used to digitally sign smart contracts, and if you are not careful, you may be giving away authority that malicious people can use to take away ‘your’ crypto assets.
There are people out there that create elaborate scams to convince crypto asset holders to connect their wallets to their phishing smart contracts so they can take over any assets stored in the victim’s wallets.
Where Can I Find my Crypto Wallet Private Key?
All cryptocurrency wallets have the option to display the wallet account details.
And there, you should be able to access the wallet account’s private key.
For example, here are the steps to find your private key in Metamask:
– Open the Metamask application on your computer or mobile device.
– Click on the three dots in the top right corner of the application and select “Settings”.
– Select “Security & Privacy”.
– Scroll down until you see “Reveal Seed Phrase” and click on it.
– You will be prompted to enter your Metamask password.
– After entering your password, your seed phrase (also called a mnemonic phrase) will be revealed.
– Copy your seed phrase and store it in a safe place. This phrase contains all the private keys for your cryptocurrencies stored in Metamask.
But have into consideration that if your wallet has several accounts, each account will have a different private key.
Here are the steps to find your private key in Exodus:
– Open the Exodus application on your computer or mobile device.
– Click on the cryptocurrency that you want to find the private key for.
– Click on the three dots in the top right corner of the wallet and select “View Private Keys”.
– You will be prompted to enter your Exodus password.
– After entering your password, your private key will be revealed.
What is the Difference Between Private Key and Seed Phrase?
The wallet seed phrase and the wallet private key have different purposes.
A wallet has only one seed phrase, whose primary purpose is to be a wallet restore mechanism. While a wallet may have many private keys whose primary purpose of a crypto private key is to sign transactions digitally.
But also, if you decide so, you may decide to export a wallet account’s private key for safekeeping or restore that wallet account to another wallet.
You can derive the public key with a private key, so exporting a private key can be used as a backup mechanism for a wallet account. (but not for the whole wallet!)
So if you have a wallet with many wallet accounts, you need to export each account’s private key for safekeeping.
Instead, with the wallet seed phrase, you can restore every wallet account’s private key, which is a more simple and more efficient backup mechanism.
What is the Difference Between Private Key and Public Key?
A private key primary purpose is to sign transactions. With the private key, you prove to be the owner of assets stored in a blockchain.
Here are some of the uses of a cryptocurrency public key:
– Address Generation: A cryptocurrency public key is used to generate a unique cryptocurrency address, which is used to receive cryptocurrency transactions.
– Transaction Verification: A cryptocurrency public key is used to verify the authenticity of a transaction. When a user sends cryptocurrency to another user, the public key of the receiver is used to verify that the transaction is legitimate and that the receiver is the rightful owner of the cryptocurrency.
– Public Ledger: Cryptocurrency transactions are recorded on a public ledger, which is a decentralized database that is maintained by the cryptocurrency network. The public key is used to identify the sender and receiver of each transaction on the public ledger.
– Identity Verification: A cryptocurrency public key can be used to verify the identity of a user. Since the public key is unique to each user, it can be used to verify that a particular user is the rightful owner of a particular cryptocurrency address.
– Digital Signatures: A cryptocurrency public key is used in conjunction with a private key to create digital signatures, which are used to verify the authenticity and integrity of a cryptocurrency transaction.
– Smart Contracts: In some cryptocurrencies, such as Ethereum, public keys are used to create and execute smart contracts. These contracts are self-executing agreements that are stored on the blockchain and can be used to automate various processes.
MCP Wallets Private Key Shares
Multi-party Computation (MPC) is a type of wallet which have no seed phrase.
An MPC wallet employs a cryptographic technique that enables multiple parties to collectively compute a function without disclosing individual inputs.
In the case of an MPC Wallet, the traditional private key is divided into shares, and distributed among various parties like wallet users or trusted servers.
– This distributed approach enhances security by preventing any single party from having complete access to the private key, eliminating potential single points of failure.
When signing a transaction, the involved parties collaborate to generate the signature without reconstructing the private key, ensuring asset security throughout the process.
An MPC protocol is initiated in a transaction initiation, such as when a user interacts with the wallet provider’s server. Each party possesses a share of the private key, utilizing it to compute individual signature shares. These shares are then combined to create a valid signature for the transaction.
In this way, private key shares are never exposed during the process, and parties cannot access each other’s shares. This safeguard ensures that even if an attacker compromises one party, they cannot gain full control over the wallet or the assets.
In short, the key advantages of MCP wallets are:
– Easy to recover
– No single point of failure for phishing
– Entirely user-controlled
The Binance self-custody Web3 wallet is an example of an MCP wallet. If you would like to learn more about the Binance MCP3 wallet, have a look at this comprehensive Medium story.
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How to keep your crypto assets safe
Now that you clearly understand what a private key is and how important it is, you may be interested in increasing your knowledge and learning about digital safety and how to keep your digital assets safe.
Which is the safest crypto wallet?
And don’t forget to also learn about digital safety good practices because the more good digital safety practices you follow, the more secure your digital assets will be.
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