To start your journey in the crypto world you have to set up a crypto wallet. This is basically your account where all of your coins are stacked. However, it drastically stands out from an ordinary bank account. The main differences are its anonymity and security — the key features cryptocurrency is valued for. To ensure these features cryptocurrency is based on certain technologies every crypto user should be familiar with:
· Private keys
· Public keys
· Wallet address
Today we are going to talk about these technologies on the example of BTC.
Wallet address is the easiest aspect to describe. It is quite similar to a bank account number or, better to say, a card number. It is mathematically related to the public key. It is important to note that the wallet address is not quite the same as the wallet itself. The former is the path that the funds follow when being transmitted to a wallet. The latter is an app or even a physical device that enables storage of the funds and supports both types of the keys.
Other peculiarities that distinguish wallet address from a bank card number are the following:
· BTC wallet address is not assigned to a particular person. To create a BTC wallet you do not need to provide any credentials or documents unlike you do at a bank when opening an account. Thus, the wallet address is quite similar to your e-mail address
· Wallet address includes both figures and letters (except for the “0”, “O”, and “I” symbols due to the complexity of their visual interpretation). Besides that, wallet addresses are usually longer than card numbers. Their lengths vary between 26 and 35 symbols including capital and lowercase letters. The string is generated automatically when a new address is created
· Due to a longer string wallet address can be presented in a form of a QR-code that can easily be shared and used with your smart phone
You can own numerous wallet addresses and share them digitally or physically — on a business card. Besides that, wallet address can also be found in the blockchain — that is how fund flows between wallets are recorded.
Public availability of your wallet address should not be the matter of concern. The wallet address itself is not enough for malicious withdrawal or transfer of your funds. First of all, this is due to the usage of private keys.
Private (or secret) key is a string closely related to the public key. Furthermore, public key is mathematically derived from the private one with the help of algorithmic transformation (encryption). Interestingly this is a one-way connection: you can derive the public key from the private one. However, reverse mathematics to derive the private key from the public one cannot be used as the private key falls within the range between 1 and 1077 and even the most powerful supercomputer will take trillions of years to crack this code using the exhaustive method.
In its original form a private key is a 32-byte figure that consists of 64 characters. Each of these characters is either a number from 1 to 9 or a letter from A to F. However, these days the wallets are presented in numerous formats:
· Compressed WIF
They can be converted between each other if required.
Why does it have to be so complicated? The reason is that the private key is responsible for two tasks related to the security of your funds:
· Secure storage. If you do not know the private key, no operations (except for payment acceptance and crypto purchase) can be held. For this reason, the key should always be kept in secret
· Endorsement of transactions. When the funds are being transmitted, the system automatically checks the consistency between the private and the public keys of the sender without disclosing them. The transaction will only be approved if such a consistency is determined
In summary, there are three ways to keep your private key in a safe space. We strongly recommend using all of them at the same time:
· On paper. The key itself is a number so you can easily print it or write it down on a piece of paper. In this case, it will never fall into the hands of Internet fraudsters. However, a piece of paper can easily get lost or ruined
· On a USB stick. This is one more way of physical storage. You can store the key as a wallet.dat file generated by the wallet, as a text file or even as a screenshot. For extra security you can use encryption utility or a USB driver with a fingerprint scanner
· On a PC. This is a reliable way of storing your private key only if your computer is not connected to the Internet. There is also a room for extra security such as encrypting your file or setting a password to you operation system
· In your mind. This way is the securest yet the most unreliable one. It might be hard to memorize a configuration of 64 random symbols. However, hardly anyone can steal it then